### RS Group plc ### (formerly Electrocomponents plc) ## Our Journey ## Annual Report ## and Accounts ## 2022 ## to Greatness ### For the year ended ### 31 March 2022 Strategic Report ### Our purpose and vision framework ## Our purpose ## Making amazing happen ## for a better world ## What we do The value we can bring ## We are a global omni-channel ## to all our stakeholders ## provider of product and service We nurture talent and ## solutions for designers, builders build a high-performance, purpose-led culture that excites ## and maintainers of industrial and empowers our people ## equipment and operations Our people Read more on pages 04 and 05 Investing in our A strategic go-to partner strategy with a strong providing product and environmental, social and service solutions enabling governance approach to Shareholders Customers our customers to achieve ## Our vision ### generate sustainable Our vision: their goals sustainably shareholder value ### first choice for all ## First choice for all ### our stakeholders ## our stakeholders Building skills of young A strategic go-to partner engineers and fostering providing global market sustainable innovation to reach and insight to expand Communities Suppliers inspire a more inclusive, revenue and develop new diverse and sustainable world products while raising supply chain standards Read more on pages 34 and 35 Revenue Profit before tax Earnings per share Dividend per share Return on capital employed 1. Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2020/21 converted ## Financial at 2021/22 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year. Acquisitions are only included once they have been ## £2,554m £302m 48.9p 18.0p 28.7% owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months (see Note 3 on pages 147 to ## highlights Change: +28% Change: +88% Change: +77% Change: +13% 2020/21: 19.4% 150 for reconciliations). 2020/21: £2,003m 2020/21: £161m 2020/21: 27.7p 2020/21: 15.9p 2. Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and 1 2 2 2 2 associated income tax (see Note 3 on pages 147 to 150 for reconciliations). Like-for-like revenue growth Adjusted profit before tax Adjusted earnings per share Adjusted operating Adjusted free cash flow profit margin | 26% | £314m | | 51.3p | | | £163m | | --- | --- | --- | --- | --- | --- | --- | | | | 1 | | 1 | 12.5% | | | 2020/21: 1% | Like-for-like | change: +81% | Like-for-like | change: +72% | | Change: +12% | | | 2020/21: £182m | | 2020/21: 31.3p | | 2020/21: 9.4% | 2020/21: £145m | Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 01 Strategic Report ### In this report Our investment proposition ## RS Group plc is listed on We are committed to delivering a lean and ## the London Stock Exchange Five key sustainable business which is well positioned ## and is a constituent of the to drive market outperformance, high-quality ## FTSE All-Share Index reasons margins and strong free cash flow. ## Stock ticker: RS1 ## to invest ## (formerly Electrocomponents plc ## with stock ticker: ECM) | | Leading global distributor to offer industrial | Our Journey to Greatness will drive | | | --- | --- | --- | --- | | Leveraging our | | | >700,000 | | | and electronic product and service solutions | stronger revenue and high-quality profit | | | | • Product and service solutions proposition | • We see the opportunity to improve further through: | stocked products | ## differentiated • Wide breadth and depth of product offer – Galvanising a high-performance, purpose-led culture ## Contents • Industrial and electronic component expertise – Realising world-class customer experience ## business model ## 23% | | | • Industry-leading product availability | – Extending our wisdom, insight and data | | | --- | --- | --- | --- | --- | | | | • Digitally-led with a human touch | – Accelerating to a solutions-led, innovative business | solutions revenue | | | | • Fast and responsive customer service | – Transforming our executional capabilities | | | Strategic report 02 | | • Strong own brand, RS PRO | | | | | 1 | | | 62% | | Our investment proposition 02 | | • Increasingly becoming a one-stop shop for our customers | | | digital revenue Our business at a glance 04 Chair’s introduction 06 Drivers of outperformance 08 Global player in large fragmented Driving continued market ## Chief Executive Officer’s review 18 Gaining share in a ## <1% marketplace outperformance Our Journey to Greatness 22 large, fragmented • Market valued at over £400 billion • Expand service solutions offer; customers receiving a share in >£400bn One Brand, One Team, One Culture 24 • Market growing at around GDP solutions-based service generate c. 30% higher growth Business model 26 global market ## market • Top 50 players account for c. 30% of market • Increase product range depth and category verticals Our strategic priorities 28 • Market consolidation accelerating • Widen industry exposure Our market and proposition 32 • We are one of a few global players • Deliver best-in-class customer experience Stakeholder engagement 34 • We have <1% of global market share • Drive greater website traffic and conversion Key performance indicators 36 • We have >1.2m customers with average order value of £211 • Leverage digital data and knowledge ## Business review 40 2 (excluding our integrated supply business’s pass-through • Differentiate different customer needs and service levels Financial review 44 sales orders) • Share expertise and services across the Group Risks, viability and going concern 50 Environmental, social and governance 58 Non-financial information statement 82 2030 ESG action plan – For a Better World Strong ESG ratings and benchmarks ## Supporting a more | | | | • CDP 2021 climate leadership score: A- | A- | | --- | --- | --- | --- | --- | | Corporate governance report 84 | | aligned with our purpose and The RS Way | | | | | sustainable and | • We attract, retain and develop industry-leading talent | • EcoVadis: Gold medal rating | | CDP 2021 climate Chair’s letter 84 within a diverse and inclusive culture • FTSE4Good Index score: 3.2/5 leadership score Corporate governance at a glance 86 ## inclusive world • MSCI: A rating • Extending our sustainable product and service solutions to Our Board of Directors 88 help our customers achieve their own sustainable ambitions • Sustainalytics rating: Global top 50 ESG companies – Board leadership and Company purpose 90 • Creating a cleaner and greener distribution model for our 18/14,661; negligible risk (6) Audit Committee report 100 distribution centres, product transportation and packaging Nomination Committee report 106 • Proactively address our environmental impacts to tackle ## Directors’ remuneration report 108 3 climate change and ensure we grow sustainably Directors’ report 130 • Build resilience in the face of long-term global challenges Statement of Directors’ responsibilities 132 such as climate change ### Financial statements 133 Independent Auditors’ report 133 Inorganic opportunities are strengthening Strategy-led prioritisation of ## Accelerating | Group accounts 140 | | | | 0.1x | | --- | --- | --- | --- | --- | | | | our proposition and growth ambitions | value-accretive acquisitions | | | Company accounts 180 | organic growth | | | | | | | • Significant investment has built a scalable operating base | • To expand product and service solutions offer | net debt to adjusted | Five year record 186 from which to enable inorganic growth • To add new product extensions and adjacencies EBITDA provides ## with acquisitions • Adding acquisitions to accelerate organic strategy • To deepen geographic coverage opportunity to invest ### Shareholder information 187 • Clear, prioritised view of targets and markets organically • Disciplined build or buy analysis, in that order Disciplined approach and inorganically • Opportunities aligned with future market trends • Shareholder value driven, not just financial metrics • Significant firepower to support growth • Cultural fit critical ## 4 • ESG lens on every transaction Driving scale and a lower cost to serve Strong cash and returns focus ## Driving strong revenue, ## • Continued market share gains • Tight working capital management and disciplined 28.7% ## cash conversion and • Gross margin underpinned by specialist service proposition capital investment return on capital • Ongoing investment delivering a strong and scalable • 70.8% adjusted operating cash flow conversion employed | | | | attractive returns | operating model | • 12.5% adjusted operating profit margin | | --- | --- | --- | --- | --- | --- | | | | | | • Utilising digital assets and data to improve returns | • 28.7% return on capital employed | | | | | | • Increasing automation in distribution centres | • Progressive dividend policy | | Scan to read | Scan to read | Scan to read our | | | | • Re-engineering supply and transport routes our Annual Report 2030 ESG action Notice of Annual • Sharing Group expertise and services ## and Accounts plan – For a General Meeting 5 • Adding acquisition opportunities online Better World 2022 02 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 03 Strategic Report ### Our business at a glance ## RS Group: One integrated Our drivers of ## global brand for the outperformance ## designers, builders and ## maintainers of industrial ## People and ## Our business ## equipment and operations ## knowledge Read more on pages 08 and 09 ## at a glance ## n Product ### i g ### s B u ### e i l d ### D ## choice | M | a | | | | | --- | --- | --- | --- | --- | | | | i n | | | | | | | t a | Read more on pages 10 and 11 | | | | | i n | | ## A global partner P r o t e c t ## 26 12.5 Providing 11.7 11 3 10.4 9.4 ## solutions 13 Read more on pages 12 and 13 8 2 1 Group ## Ease of ## doing business Read more on pages 14 and 15 18.00 48.9 15.40 15.90 14.80 | EMEA 62 | EMEA 65 | 13.25 | 33.9 | 33.4 | 34 7 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 27 7 | | ESG | | Americas 28 | Americas 27 | | | | | | | | | Asia Pacific 10 | Asia Pacific 8 | | | | | | Read more on pages 16 and 17 | | Read more on pages 24 and 25 Our ESG goals: Our ESG ratings and standards: ## Breadth of service ## Our 2030 ESG ## Revenue split by product Revenue split by Working with over Over action plan and service solutions range of industries For a Better World is our 2030 action plan to support ## 2,500 60,000 Advancing Gold medal rating a more sustainable and inclusive world. We are bringing suppliers for our stocked parcels shipped daily sustainability our people, customers, suppliers and communities together product range to accelerate our positive impact and deliver our purpose Over of making amazing happen for a better world. Digital market leader Climate leadership score: A- ## 700,000 ## 62% stocked and three Championing revenue through million unstocked education and digital channels high-quality industrial innovation Global top 50 ESG companies – 18/14,661; and electronic products Negligible risk (6) Operations in Electrical 21% Original equipment Over | | Automation and control 23% | manufacturing | | | --- | --- | --- | --- | | Revenue split Profit split | | | | | | Mechanical and | Commercial and | 32 | | | fluid power 4% | financial services | | ## 1,200,000 countries | | Electronics 22% | Electronics manufacturing | | Empowering | A rating | | --- | --- | --- | --- | --- | --- | | | | | customers | | 2021 | | | Single-board computing 3% | Process manufacturing | | our people | | | | Facilities and | Public sector | | | | | | maintenance 22% | Transport and defence | | | | | | Other 5% | Utilities and energy | | | | | Dividend per share Earnings per share Like-for-like revenue Adjusted operating | | | | | | | (pence) (pence) growth (%) profit margin (%) | | | | | | 24% Doing business Index: 3.2/5 score 12% Read more on pages 58 to 81 Read more on pages 32 and 33 responsibly 2021 13% 12% | | 04 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 05 | | 3% % % | | --- | --- | --- | --- | | | | | 8% % % | | | | | 5% % % | | Other 23% | | 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 | | Strategic Report ### Chair’s introduction RS Group (formerly Electrocomponents) Our commitment for a better world passion and enthusiasm were infectious, The Board understands the importance of has had a very strong year and made huge Our purpose-led culture underpins our and very humbling. the dividend to its shareholders, and we are progress towards our vision of being first environmental, social and governance pleased to continue with our progressive Becoming great choice for all our stakeholders. As I reflect (ESG) ambitions and in November 2021 we dividend policy. The increase in the dividend Our fast and responsive omni-channel on these achievements, my overriding launched our 2030 ESG action plan – For reflects the Board’s confidence in the future experience, broad product choice and sense is one of thanks to Lindsley, David, a Better World. Framed around four global prospects of the Group and its strong availability, and expanding solutions offer the Senior Management Team (SMT) and goals, our plan sets out 15 long-term balance sheet. are key to our outperformance and evident all the employees of the Group for their hard commitments to contribute towards a more in an increasing average order value and Our Board work, dedication and good humour. Our sustainable and inclusive world, while growing business-to-business customer We have an excellent Board, with varied success is a testament to them. To deliver delivering long-term value to all our base. Our performance demonstrates the and relevant experience combined with a such good results in the face of supply stakeholders. I am extremely proud of our ## “Our performance | | | strength of our people and proposition and | positive but challenging approach. My most | | --- | --- | --- | --- | | chain disruption, COVID-19 restrictions and | work in this area and pleased that our | | | | | | fills us with great confidence in our future | sincere thanks goes to the Board members | | geopolitical stresses is remarkable. | improved sustainability progress is receiving | | | | | | journey. We know we can be even better. | for their ongoing contributions and | external recognition too (see page 59). The tragic events which have unfolded in commitments. Earlier in the year In March 2022, the Company held an ## demonstrates the Ukraine have truly shocked and saddened Bertrand Bodson stood down from the To be first choice Investor Event which outlined the five key me and highlight the ongoing difficulties Our vision is to be first choice for all our Board and I would like to thank him for his opportunities which will drive us on our and uncertainties being faced. My thoughts stakeholders: our people, customers, significant contribution over the past six Journey to Greatness to deliver stronger are with all those who are affected by suppliers, communities and shareholders. years. As Bertrand stepped away, we revenue and high-quality profitable growth. ## strength of our the situation. welcomed Alex Baldock, chief executive This vision ensures we are focused when This journey requires further improvement planning and executing our strategy. of Currys plc, in September 2021 and High-performance, in our performance and execution to move welcome Navneet Kapoor, executive and purpose-led culture Our people are our most important asset us from a good Company to a great one chief technology and information officer at | | This has been a year of continued | and we are passionate about nurturing | and we set out on pages 22 and 23 how | | | --- | --- | --- | --- | --- | | people and | | | | A.P. Møller Maersk, who joins on 1 June | | | outperformance with very strong l ke-for-like | talent. We want to be our customers’ go-to | we plan to achieve this. | | 2022. Both Alex and Navneet have led revenue growth and operating profit margin provider of product and service solutions From Electrocomponents to transformations from a product-driven to improvement across all three regions, and our suppliers’ go-to partner as we RS Group service-driven business in very different most notably in Asia Pacific. We have expand their market and product reach. Our ## proposition and industries and have great international and The Board approved the decision to rename demonstrated our resilience and the strong commitment to supplier relationships digital experience. the Company to RS Group plc bringing our benefits of a clear strategy, a and investment in our facilities enabled us business together under one brand, united high-performance, purpose-led culture to maintain good product availability and Looking forward behind our vision of being first choice for all and the ability to act as one team. customer service despite global supply As we set out on our Journey to Greatness, ## fills us with great our stakeholders. We believe this will allow constraints. We have continued to invest in we are aware of the challenges and Our culture is a critical factor to our customers and suppliers to see the full our people, new innovative solutions and uncertainties of the external environment. success. We have a team of amazing breadth of our offer, our people to feel part operations to support our growth. However, given what the Group has leaders who are cultivating an environment of one joined-up global business and our achieved so far, the clarity of our strategy, ## confidence in of growth, innovation and operational We work hard to generate sustainable communities and investors to have a clearer the attractiveness of our offer and the excellence, making the Group a place value, both for our communities through our view of what we stand for and our further growth opportunities we see, we people want to join and work. We ensure educational programmes and environmental opportunities for growth. remain confident for our future sustainable their health, safety and wel being is our improvements, and also for our journey and that we can continue to drive ## our future journey.” Our investors number one priority and we invest in their shareholders. I believe we have a value for all our stakeholders. It is of critical importance to me that we training and development to ensure we responsibility to motivate, support and maintain an active and open dialogue with ### Rona Fairhead have a solid infrastructure for organic excite young people, especially within the Rona Fairhead our investors. During the pandemic, and inorganic growth. This is further engineering industry; after all, they are our Chair ### Chair meetings were limited to virtual only. supported by the SMT which we continue future. In November 2021, I visited our 24 May 2022 However, as the COVID-19 restrictions to strengthen. operations in Fort Worth, US, and was eased during the year, we were fortunate to fortunate to meet some of the research meet many of our shareholders in person students we sponsor at Texas A&M and look forward to meeting many more, if University and some of the businesses appropriate, at this year’s Annual General we support in our DesignSpark Innovation Meeting and beyond. Centre (see page 67). Their ideas, ## Driving value ## for all our ## stakeholders Our people Customers Suppliers Communities Shareholders Committed to developing Saving our customers Extending market reach Respecting, protecting Delivering sustainable talent and building a time and money and and providing insight and contributing to the growth and superior high-performance making it easy for them and analysis for our communities in which value for our culture to run their businesses suppliers we operate shareholders | 75 | 50.6 | 2,500+ | 500+ | > £2bn | | --- | --- | --- | --- | --- | | employee | Net Promoter Score | suppliers for our stocked | hours volunteered by | total shareholder return | | engagement score | | product range | RS for The Washing | over 3 years | Machine Project Read more Read more Read more Read more Read more on pages 69 to 73 on page 30 on page 30 on pages 66 to 68 on page 127 06 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 07 Strategic Report ### Drivers of outperformance ## We have a diverse ## and experienced ## high-performance ## team ## Our people are empowered with the skills and knowledge ## that drives our outperformance and vision of becoming ## first choice for all our stakeholders Engage Retain Develop Listening Inclusive to employees environment Culture Supporting My Amazing communities Academy Leaders DesignSpark Health, safety and wellbeing Diverse Reward talent and benefits Grass Future Shapers Roots • High-performance, purpose-led culture • Transparent, accountable and • Dynamic and digital learning pathways • Grass Roots education programme inclusive environment for all employees via My Academy supporting future engineers • Employee networks that create • Future Shapers talent programme and innovators greater awareness of the communities • Amazing Leaders: peer-to-peer • DesignSpark engineering and in which we operate learning, developing behaviours innovation community • Global listening strategy through and capability for future success • Diverse and extensive physical, engagement pulse surveys • Targeted leadership programmes financial and occupational benefits • Mental heath training and Target to support female and Zero accidents programme ethnically-diverse talent | 90% | 75 | | --- | --- | | employee | employee | | retention rate | engagement score | 08 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 09 Programme Strategic Report ### Drivers of outperformance continued ## Our broad and deep ## product offering ## differentiates us ## We are a leading distributor with the product range, ## superior availability and responsive service capability ## to offer industrial and electronic components globally ### Broader and wider product offer versus major competitors ### Unnamed major competitors ### 1 2 3 4 5 6 7 Industrial Automation and control products Electrical Mechanical Fluid power Tools Personal protective equipment Electronic Semiconductors and passives products Electromechanical and interconnect Single-board computing Full product offer Part range Over ## 700k 80k stocked products RS PRO products 10 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 11 Group Strategic Report ### Drivers of outperformance continued ## We solve customer ## problems and unlock ## new opportunities ## Our product and service solutions meet the needs ## of designers, builders and maintainers of industrial ## equipment and operations as they manage their design, ## procurement, inventory and maintenance needs ### Solutions that span our customers’ asset lifecycle Design Procurement Inventory Maintenance ® • Technical support • RS eProcurement solutions • RS ScanStock • Cal bration ® • Virtual demo lab • RS PurchasingManager™ • RS VendStock • Lubrication / oil analysis ® • Product comparisons • RS ConnectPoint • RS Plus™ • Condition monitoring • Design support • RS Product Plus • Stores management • Safety Solutions • Prototyping services • Integrated Supply • Kitting / special handling • RS Industria™ • DesignSpark • MyMRO / Sync • Scheduled orders • Energy optimisation ## 23% >700 of Group revenue attributed solution experts to service solutions 12 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 13 Strategic Report ### Drivers of outperformance continued ## We deliver a ## technology-enabled ## experience with ## a human touch ## Our omni-channel offer ensures we serve our customers ## through the most appropriate channel to give them ## a personal, efficient and differentiated experience | >1,50 0 | | 7 | | --- | --- | --- | | sales, customer and | multiple high-touch | | | technical team | channels to serve | | ## 62% members customers of revenue through digital channels ## >300k Omni-channel >15m ## customer interactions web visits c. 4% ### offer per year per month of Group revenue spent on digital per annum | | 2.7m | 10k | | --- | --- | --- | | technical document | | live chats | | downloads per month | | per month | 14 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 15 Strategic Report ### Drivers of outperformance continued ## Our strong ESG ## approach underpins ## all we do ## Our 2030 ESG action plan – For a Better World is aligned ## fully with our purpose and embedded into our strategic ## plan, growth initiatives and management targets | 50% | £300m | 75 | 32% | | --- | --- | --- | --- | | reduction in Scope 1 | sustainability-linked | employee | women in | | and 2 emissions since | loan to help facilitate | engagement score | leadership roles | 1 2019/20 ESG action ## ESG will be embedded in our ## 500+ 1st ## annual incentive, covering circular product ## c. 40% of employees recycling scheme ## hours with Raspberry Pi volunteered by our people for The Washing Machine Project 1. Scope 1 and 2 CO 2 e emissions updated to reflect changes in reporting and emissions factors. 16 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 17 Strategic Report ### Chief Executive Officer’s review Our year which I am directly accountable. We want We have had a very strong year, reflecting to be a leader in creating a more sustainable the work our people and teams have done and respons ble future and know that this in strengthening our position as a global can also be a key value driver and omni-channel provider of industrial product competitive differentiator. and service solutions. We have delivered In November 2021, we launched our 2030 strong revenue and profit growth despite the ESG action plan, with four global goals challenges created by the pandemic, global and 15 supporting actions. It is integrated supply chain disruptions and cost inflation. into our strategic plans, our 2022/23 Our performance is down to our talented management incentive targets and ## “Our people, and our number one priority underpins our purpose. Importantly, we remains their health, safety and wellbeing. are supporting all our stakeholders as The pandemic brought us closer together as they become more sustainable: we sell colleagues and as a Group. Physically we products and service solutions that support ## outperformance have spent much of the year working apart, our customers’ and suppliers’ sustainability but our strong technology capability has ambitions; we are attracting and allowed us to operate uninterrupted and empowering a more diverse workforce and connect better across teams and regions. we are adding value to our communities ## reflects the hard through our educational resource; and we There has been a change in culture across are improving returns for our shareholders. the Group as we have invested in talent, Our work is also recognised externally by ## Bridging the past empowered our leaders and incentivised strong ESG ratings which is already proving our teams with targets they can identify | work of our skilled | | a differentiator in winning commercial tenders. | | | --- | --- | --- | --- | | | with and influence. The culture change | | with the future | | | has been the main driver of our market | Reviewing 2021/22 | | | | outperformance in all three regions, with | We delivered very strong l ke-for-like | At the end of March 2022, I was honoured to be joined by our former Chairman and | | | greater operational ownership underpinning | revenue growth of 26% during the year, of | CEO, Bob Lawson, at our Investor Event where Bob outlined what drove our recovery | ## and dedicated stronger profitable growth. We thank all our which c. 19% was volume and mix driven. over two decades ago: it was from being focused on our customers, having a culture 7,654 employees and feel honoured that We have grown market share in all regions that embraced testing and learning, developing our internet capabilities and being 90% choose to remain with us. through providing an extensive product and international. What underpinned it all, the foundation of our business, was providing a service solutions offer and industry-leading first-class customer service and experience that ensured we only ever had satisfied ## people.” This year has been one of external product availability with a fast, responsive customers. Fundamentally, these attributes have also been key in driving our recognition too. Our strength has resulted in and omni-channel customer experience. recovery over the last seven years and continue to underpin our strategic ambitions ### Lindsley Ruth us re-joining the FTSE 100 Index, over 19 and future growth. years after we left. We also won ‘company We have strengthened our customer ### Chief Executive Officer (CEO) | of the year’ at the plc awards 2021, were | relationships, delivered a more tailored user | | Lindsley Ruth, current CEO, with Bob Lawson, CEO (1992–2001) and Chairman | | | | --- | --- | --- | --- | --- | --- | | voted one of the Top 50 Inclusive UK | experience and offered services to solve | | (2001‑2006) | | | | Employers 2020/21 and are ranked by | our customers’ procurement problems. This | | | | | | Sustainalytics as 18 out of 14,661 | has resulted in a higher average order value | | | | | | companies globally for our environmental, | for our non-integrated supply business, | | | | | | social and governance (ESG) commitment. | growth in our business-to-business (B2B) | | | Scan to watch | | | Achieving these milestones reflects the | customer base and increased levels of | | | our Investor Event | | | hard work all our teams do to fulfil our | customer engagement. We are increasingly | | | | | | purpose of making amazing happen for | becoming a one-stop shop for our | | | | | | a better world. | customers. | | | | | | Our transformation | Meanwhile, our procurement expertise and | | | | | | | | We have also seen greater labour and | | | Our operating profit grew by 85%, or 70% | | We have come a long way since I joined | experience allowed us to identify supply | | | | | | | | energy inflation, although the latter is not | | | on an adjusted basis to deliver a 3.1 | | the Company in 2015, transforming the | issues in the market early and work closely | | | | | | | | significant given our capital-light business | | | percentage point improvement in our | | performance and aspirations of our | with our suppliers to secure and invest | | | | | | | | model and move towards lower-carbon | | | adjusted operating profit margin to 12.5%. | | business. We have proven our ability to | appropriately in greater levels of inventory | | | | | | | | facilities and sustainable energy sources | | | On a two-year basis, and so excluding the | | outperform consistently and deliver market | and ensure industry-leading availability. | | | | | | | | (88% of our electricity is from renewable | | | impact of the COVID-19 pandemic in | share gains; improved the Group’s We have taken actions during the year sources). Given the importance of our 2020/21, revenue and adjusted operating profitability and shown we can operate to improve our gross margin through people, we ensure we offer competitive pay profit grew by 31% and 45% respectively. better and more sustainably; demonstrated | | revising our pricing and discount policies, | and benefits, implementing a real pay rise | | | --- | --- | --- | --- | | the strength of the business through the | | | We completed the physical expansion of | | | developing our own-brand range and | and an additional ‘thank you’ bonus to all | | | cycle and particularly in difficult | | | our German distr bution centre (DC) in | | | negotiating buying terms better. This has | permanent employees during the year. | | | macroeconomic conditions; and | | | September 2021. This will, in time, double | been delivered despite some regional and accelerated our growth opportunities We continually invest in our operating model our capacity and improve our speed and product mix dilution and ongoing pressures with bolt-on acquisitions. to strengthen our expertise, advance our service in Europe, mitigating some of the from inbound freight inflation. technological and digital capabilities, grow our additional costs and processes arising from Our outperformance is underpinned by being Cost pressures have worsened. Freight product and service solutions capacity and the UK’s exit from the European Union. resilient and adaptable. We have a long rates and delivery charges remain at improve our operating basics. We have history of controlling our own future through We remain strongly cash generative, elevated levels and show no signs of strengthened our experience in areas where anticipating and adapting to market despite additional inventory investment abating. We are managing the cost impact we can widen our competitive differential changes, to delivering a first-class as we deepened our product offer through through storing our product closer to the further. We have developed internally and customer experience and evolving our our expanded DCs in the US and Germany customer and working with our suppliers recruited externally excellent people who proposition to become solutions led. and ensured strong product availability to become more regionally sourced. This support our ambitions for stronger revenue This has been fundamental to our growth despite supply chain disruptions. action is reducing our freight miles, and and high-quality profitable growth. journey and sets us aside from our more those of our suppliers, thereby decreasing We are financially strong and remain transactional competitors. Even after this targeted operational carbon emissions too. extremely disciplined. Our return on capital investment, our adjusted operating profit We are a socially and environmentally employed improved nearly 10 percentage conversion improved by 6.4 percentage responsible organisation with high ethical and points to 28.4%. governance standards which I lead and for 18 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 19 Strategic Report ### Chief Executive Officer’s review continued Our Journey to Greatness We see a huge growth opportunity for RS ## Our drive to net zero Group. We have less than a 1% market share of a very fragmented market and our Climate change is one of the greatest proposition is resonating. We believe we challenges facing our world today. As a can increase our ambitions, moving from critical partner to the global industrial the good business we are today to a truly sector, we are committed to reducing our great one. climate impacts by adopting a cleaner and greener distribution model, while We are calling this next phase our Journey providing sustainable product and to Greatness. We have a differentiated service solutions that enable our business model, but it can be better. To be customers and suppliers to address great, we need to benchmark our business their climate goals. against the highest global standards and deliver best-in-class growth and returns In November 2021, we launched our within our core competitive strengths by: 2030 ESG action plan – For a Better • Galvanising a high-performance, World. Our ambitious new plan includes purpose-led culture a commitment to achieve net zero in our • Realising a world-class customer direct operations by 2030 and in our experience wider value chain by 2050. To deliver • Extending our wisdom, insight and data this, we have set three science-based • Accelerating to a solutions-led targets covering our Scope 1, 2 and 3 innovative business carbon emissions and submitted these • Transforming our executional capabilities | in May 2022 to the Science Based | of which 19% of our suppliers by spend | To complement our commitments, we | | | --- | --- | --- | --- | | Targets initiative (SBTi) for verification. | have already done so. | conducted a climate risk and opportunity | To mark this change, on 3 May 2022, we | | In doing so, we join the largest global | | assessment and scenario analysis in line | became RS Group. RS is our primary | We are also expanding our product and alliance on climate change: the United with the recommendations of the Task customer brand, recognised by engineers service solutions that help our customers Nations Race to Zero and the UN Global Force on Climate-Related Financial around the world. It has its roots in the very increase the sustainability of their Compact’s Business Ambition for 1.5ºC. Disclosures (TCFD) in 2021/22. A beginnings of the Company, which began operations and address their climate goals. | | | summary of our TCFD disclosure can be | life as Radiospares in 1937, founded on the | | --- | --- | --- | --- | | Our decarbonisation plan is progressing | Our plan is to introduce an RS sustainable | | | | | | found on pages 78 and 79. | same principles that guide us today: ease of | | well. In 2021/22, we obtained 88% of our | product flag and range in 2022/23 to give | | | doing business and putting the customer electricity from renewable sources. We our customers greater choice and There is a long road ahead, but we will first. As RS Group, we are bringing our have achieved an absolute Scope 1 and confidence. During the year we were continue to strive to be a catalyst for business together under one strong, unified 2 emissions reduction of 50% and awarded an A- rating by CDP for our 2021 positive change throughout the global global brand, united behind our single intensity reduction of 63% since 2019/20 action and disclosure on climate change industrial sector and making amazing purpose. We believe this will open many (tonnes of CO 2 e per £m revenue). both for our direct and supplier engagement happen for a better world. more opportunities for us, unlocking our | Beyond our own operations, we have | action. This reflects our ambition to raise | | | | | --- | --- | --- | --- | --- | | | | Read more on page 61 | global efficiency, enabling scalability and | | | encouraged our global suppliers to set | climate action across our value chain. | | | Mitigating against supply | helping us deliver our Journey to Greatness. carbon reduction targets with the SBTi, There is no change to our strategy. Our ## chain disruptions strategic roadmap, Destination 2025, has points to 28.7% and we increased our Cultural transformation: Growth accelerators: driving a evolved into The RS Way, reflecting greater Over the last two years, there has been much disruption to global supply chains dividend by 13% to 18.0p. ambitions to drive stronger revenue and having a high-performance, compelling value proposition across many industries. The effects from COVID-19 and its variants, the UK’s exit high-quality profitable growth. We have a purpose-led culture and customer experience from the European Union, resource shortages and the Suez Canal blockage have We believe we can accelerate our growth purpose-led culture and vision with ESG Our people are our most important asset We have three growth accelerators which resulted in logistical and capacity challenges, increased freight costs and material ambitions through ongoing organic embedded in everything we do to advance and differentiate us. We have a diverse and underpin our vision of being first choice and product shortages. We implemented a number of actions to maintain our investment, with value-accretive sustainability, champion education and inclusive culture, not just in gender and for all our stakeholders: high-service level operation and minimise the impact not only for our customers, acquisitions which will enhance our innovation, empower our people and be a ethnicity but also mindset, which is vital in • We are easy to do business with: suppliers and the environment, but also the communities in which we operate. Such proposition strategically. Our priority is responsible business. creating engaged, adaptable and our fast and responsive omni-channel actions included moving freight from air to road in Europe and from air to sea in Asia to pursue high-quality businesses that high-performing people. model delivers a seamless end-to-end Pacific, sourcing more products locally and working with our strategic partners to can expand the Group’s product and In summary customer experience through digital strengthen our carrier relationships and negotiation expertise. To help protect our service solutions offer, extend our product As I write, there is a significant amount of Operational efficiency: channels, human touch or a combination customers from product shortages, we increased our holding of replenishment offering and / or strengthen our position uncertainty around the world including the delivering world-class capability inventory to coincide with longer lead times, undertook strategic buying where of both with specialist support and geographically. With our strong balance invasion of Ukraine and geopolitical fallout; and execution possible and accelerated our strategy of positioning faster-moving products closer to product knowledge. | sheet, we have significant firepower but | | | the lockdown of many cities in Asia owing to | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | We have invested in our DCs to expand | • We offer a broad and deep product | | | the customer to reduce lead times, improve consistency of service and reduce cost. | | | | we are maintaining our financial discipline | | | further outbreaks of COVID-19 and its | | | | | | | inventory capacity, increase automation, | offer: strong and extensive supplier | | | Our actions have delivered service and cost benefits while reducing our CO | | 2 | | with acquisitions assessed on delivering | | | variants; and the continued impact of | | | | | | | develop technology and drive environmental | relationships ensure product choice, | | | emissions and have been a key driver of our market outperformance. | | | | strategic and financial benefit, strong | | | inflationary pressures as well as a potential | | | | | | | efficiencies. This has allowed us to source | availability and substitute options. | | | | | | | returns and the all-important cultural fit. | | | severe global economic slowdown. While we | | | | | | | and store more product locally, re-engineer | • We provide product and service | | | | | | | We are in a number of active discussions | | | have no operations in Ukraine or Russia, our | | | | | | | supplier routes to reduce carbon emissions | solutions: solving our customers’ | | | | | | | that meet our strict criteria. | | | thoughts and support are with all those | | | | | | | and develop a scalable global network to | problems across the design, build and | | Having repositioned our Group, we can | | and high-quality profitable growth, enhanced | | affected by the events. We are mindful of the Becoming first choice support our revenue growth ambitions. maintain lifecycle drives closer and see the opportunity to unlock further by strategic acquisitions, with a mid-teen challenges that all our stakeholders face and Our vision is to be first choice for all our Additionally, our regional centres of stronger relationships and greater value. growth through leveraging the Group’s adjusted operating profit margin and continue to provide assistance where we can. stakeholders: our people, customers, expertise leverage our wisdom, insight and differentiated model, improving our underpinned by at least a 20% return on Combined, these three key themes, driven suppliers, communities and shareholders. data across our core commercial functions However, despite these uncertainties we operational execution and ensuring we capital employed. by our people and aligned to our purpose, Delivery of this vision is planned and to drive scale and improve efficiency. have established a track record of being contribute to making amazing happen ensure we provide a compelling customer Lindsley Ruth monitored according to three key themes resilient through the economic cycle and for a better world. | | experience and value proposition. | | | Chief Executive Officer | | --- | --- | --- | --- | --- | | and incorporates our stakeholder feedback | | particularly during periods of macroeconomic | | | | | | | Our strong market share growth and | 24 May 2022 | | and needs (see pages 34 and 35). | | uncertainty. This has been driven by our | | | outperformance underpins our confidence people, having a purpose-led culture and in being able to deliver stronger revenue working as a team. 20 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 21 Strategic Report ### Our Journey to Greatness We know that organisations which actively invest in their culture outperform their competitors. We want to attract, develop and retain ## Supported by robust ## Our Journey the right talent through creating a purpose-led culture that empowers and excites. We are investing in our people by upgrading ## systems, processes ## G their skills and rewarding our managers based on the quality of employee experience they provide. We want to ensure that all ## and technology ## to GREATness employees bring their true self to work. This will develop an ## Galvanising a employee and candidate experience that sets us apart. Our systems, processes and technology support our value generating opportunities and ensure ## high-performance we are in a strong position to achieve greatness. ## requires: purpose-led culture We have the data and insight to understand and anticipate better our customers’ needs, optimise and accelerate product range expansion and develop a more customised and proactive customer ## We believe we can deliver service. All this is supported by our global distribution centre ## R network. We are expanding our product and service solutions ## stronger revenue and further, especially our industry-leading global integrated supply proposition. Ongoing development of our technology will provide an ## high-quality profitable Systems ## Realising a world-class even more personalised customer experience through both digital channels and human touch to exceed customer expectations for ## growth. To do this, we need ## customer experience speed, responsiveness and ease of doing business. ## and want to be great. ## We need to improve our Wisdom comes from combining knowledge, judgement and data. ## competitive strengths further We continue to invest in our data and insights capability to ensure we are differentiated and stay ahead of our competitors. We are ## by benchmarking our analysing over 100 billion data records, including over 150 data ## business against the E points per customer, providing us with a better understanding of our Processes customers and their behaviour. We can apply this insight to improve ## highest global standards. our pricing strategy, choose which markets and product ranges are ## Extending our wisdom, most attractive and which services to offer. We see the opportunity to monetise our data to drive commercial value through new ## insight and data revenue streams. We have an ever-growing portfolio of product and service solutions that solves our customers’ problems, supports our suppliers and generates long-term sustainable revenue. By evolving our solutions Technology through iterative development, we can solve bigger problems, drive ## A greater value and move from more transactional to strategic relationships. We are creating and introducing new innovative and digitally-enabled solutions for our customers which are generating ## Accelerating to a additional revenue opportunities across the whole Group. This includes our integrated supply offer and our own brand, RS PRO. ## solutions-led innovative ## business Distr bution is all about execution. We are focused on giving the right tools to the right people and marrying global expertise with local knowledge and experience. We have aligned operating plans fully across the Group. Our detailed operational reviews ## T highlight where we can learn and improve as one team in order to enhance our organisational capabilities and develop a scalable go-to market strategy. We are improving efficiencies through ## Transforming our creating a lean and scalable business model based on simplicity, transparency and accountability which is delivering an improvement ## executional capabilities in employee engagement. 22 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 23 Strategic Report ### One Brand, One Team, One Culture ## The future RS Group ## RS Group: ### We are a leading global omni-channel industrial product and service solutions provider ### to customers who are involved in designing, building and maintaining industrial ## One Brand ### equipment and operations, safely and sustainably. ### We are moving from a portfolio of separate brands that deliver product and services ### solutions across our customers’ asset lifecycle to become a cohesive Group that drives ## One Team ### greater sustainable value for all our stakeholders as we operate under one brand, RS. ## One Culture ## RS PRO ## n ## RS PRO is the Group’s main own-brand product range of g ## i | | | s | B | u | | | --- | --- | --- | --- | --- | --- | | | | | | | i l d | | 80,000 high-quality, competitively priced industrial products | e | | | | | ## D ## Our name change to M a ## i n ## RS Integrated Supply t a ## i n ## RS Group plc in May 2022 ## starts our transition for our We provide integrated global supply solutions for maintenance, P r o ## t e ## repair and operations, trading as IESA and Synovos in 2021/22 c ## t ## brands to unite under the ## RS name. ## Being one strong, unified global brand will open many more RS Safety Solutions opportunities for us; unlocking our global efficiency, delivering scalability and helping us deliver our Journey to Greatness. This is an opportunity to achieve our vision to be first choice We are multi-specialists for personal protective equipment and EMEA for all our stakeholders. Our people can feel part of one hygiene solutions, trading as Needlers and Liscombe in 2021/22 ## Americas joined-up global business: one brand, one team, one culture. Our customers and suppliers can easily see the full breadth ## Asia Pacific of our offer, our shareholders can have a clearer view of the sum of our parts and the communities we impact can be clear ## RS DesignSpark on our purpose and what we stand for. RS DesignSpark is a community of engineers and students sharing design tools and resources OKdo is a technology solutions business focused on single-board computing, Internet of Things and education Design Build Maintain Protect 24 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 25 ## Group Strategic Report ### Business model ## We provide the product and service solutions that help our ## Our competitive customers design, build and maintain industrial equipment ## and operations, safely and sustainably ## advantage ## Design Build Maintain Protect ## We have a deep understanding We provide what our We deliver solutions to make us ## of our customers customers need first choice for all stakeholders Across industry verticals, our customers range from small local single What differentiates our proposition is that we ensure We combine our product offering, services portfolio and site businesses through to multi-site global companies. Our service we provide a compelling customer and supplier responsive experience to deliver solutions which generate proposition depends on our customers’ needs and the touch points experience and value proposition. Our outperformance sustainable value for all our stakeholders. This underpins our we have with them to maximise customer lifetime value. Our solutions is driven by continuously developing and improving vision of being first choice for all our stakeholders. offer is broadly for corporate and key customers. these growth accelerators. ### Omni-channel A broad and deep range of Corporate industrial and electronic products International or nationwide company, Product multiple locations, central purchasing choice ### >700,000 stocked ### products Integrating A portfolio of solutions across Products Services Key products and services which adds Typically single location, Product value and resolves problems medium-sized company Solutions and service Consolidating ### 23% of Group revenue solutions ### attributed to service ### solutions ### Human Solutions focus Experience Standard Single location, Technology-enabled experience small and medium-sized company powered by human touch, knowledge Ease of Transactional and expertise doing business ### 62% of Group revenue ### Digital through digital channels 1. Excluding our integrated supply 1 >1.2 million customers with average order value of £211 business’s pass-through sales orders. 26 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 27 Strategic Report ### Our strategic priorities ## During 2021/22 we ## The RS Way ## made strong progress ## Our strategy is ## against our five strategic ## unchanged, but our ## priorities despite the ## ambition has increased ## external pressures we ## faced. We remain ## confident in our ability ## to develop our offer ## further and build the ### h a p p e n f o r a ### i n g b e ### z t t e ## a r right capabilities and ### m w ### a o ### g r l ### i n d ### k ## a infrastructure to enable ### M ## us to grow and scale our ## business more efficiently. ## 1 High-performance team ## 5 2 Reinvestment to Best customer accelerate growth and supplier ### Focused experience ### on becoming ### first choice for all ### our stakeholders ### D ### r y ### l ### i l ### v ## 34 ### i a ### n ### b ### g ### o ### l ### s Operational Innovation ### c g ### a excellence ### e ### l v ### e r ### b e ### s ### y ### o ### g t ### a ### y ### i t ### n i ### l ### i i ### n b ### g ### a ### m ### d ### a n ### r a ### k ### e e ### t c ### s n ### h e ### a r i ### r e e ### t p ### h x ### r o e ### u r ### g e ### h o m ### o u u s t ### r s u p e r i o r c Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 2928 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Strategic Report ### Our strategic priorities continued ## The RS ## Way ## Our progress ## 1 2 3 4 5 ## against our five ## High-performance Best customer and Innovation Operational Reinvestment to ## strategic priorities ## team supplier experience excellence accelerate growth ## and future initiatives What this means What this means What this means What this means What this means Investing in our people to build a By excelling at the basics and providing Introducing new products and solutions to Continuously improving service and Being disciplined in our allocation of cash purpose-led, customer-focused, diverse differentiated solutions, we are putting our harness our digital expertise, data and efficiency to build a sustainable business. between organic investment to drive faster global talent base and leadership team. customers and suppliers at the heart of our insight. Taking advantage of new growth, inorganic opportunities and Our progress in 2021/22 business and making their lives easier. technologies and changing market attractive sustainable shareholder returns. Our progress in 2021/22 We are focused on continuous improvement dynamics to create new opportunities Our people engagement score continued to Our progress in 2021/22 to provide best-in-class customer service Our progress in 2021/22 for growth and efficiency. trend in a positive direction at 75 (2020/21: We are focused on driving a fast and while driving operational efficiencies. During the year, we continued our operating 74), putting us on track to achieve our responsive omni-channel experience for our Our progress in 2021/22 and capital investment to drive stronger We have improved our operational ambition to be in the top 10% of customers. This year we rolled out an Throughout the year we have continued to revenue and high-quality growth. capabilities in the year by training 1,069 | high-performing companies for engaged | improved purchase experience with ‘single | drive innovation to support our customers, | | | | --- | --- | --- | --- | --- | | | | | employees across the business to become | We increased our inventory by over 20%, | | employees by 2030. | basket’ allowing customers to build baskets | suppliers and communities. | | | | | | | process improvers and lean thinkers. | despite the global supply chain challenges, | across multiple devices, and developed a To support our commitment to employee Across EMEA, we launched a new We have introduced 78 continuous leveraging our supplier relationships and more responsive user interface meaning the development, we launched My Academy in service solution in 3D printing and printed improvement ambassadors helping to global footprint to support industry-leading customer’s view is optimised depending on July 2021. This is a global digital learning circuit board manufacturing to support deliver over 300 projects in the year. availability and a competitive advantage. the device they are using. | platform accessible by all employees to | | customers engaged in product design | | | | --- | --- | --- | --- | --- | | | | | We continue to enhance our website | We invested in product development and | | connect, learn and grow. It helps them to be | We have developed our approach in | and manufacturing. | | | | | | | capabilities to ensure a seamless customer | innovation, systems and technology, digital | | self-driven and have a more personalised | delivering greater customer lifetime value | | | | | | | RS Industria™ was launched in the UK | experience. We have deployed a new | content and our people to ensure we are | | learning experience. It is available in 27 | through improving our focus on acquiring, | | | | | | | to support our customers with their | content management system for our | well positioned to capitalise on the market | | languages and over 6,000 employees have | developing and retaining our customers. | | | | | | | maintenance needs. Using data insight, | website that enables quick, easy and | trends we see. | | completed over 62,000 items of learning. | This has resulted in an increased share of | | | | | | | RS Industria™ is able to predict the | efficient digital content changes and | | | This contributed to a total of over 32,000 | wallet and more efficient cost to serve, | | | We continued to invest in a scalable, highly | | | | needs of our customers’ business | integration with personalisation and | | | hours of online training across the year. | resulting in greater profitability. | | | automated and sustainable supply chain | | | | before a problem occurs, while also | automation technologies to help create | | to support growth at a lower cost. The In addition to this, our leader development We continue to work with our suppliers to supporting their sustainability goals a customised and responsive digital expanded distr bution centre in Bad programme, Management Matters, improve the sustainability of our value chain by providing energy usage insight, experience for our customers. Hersfeld, Germany opened in September | continues to offer prioritised digital learning | and to source and deliver innovative and | process quality and asset reliability. | | | | --- | --- | --- | --- | --- | | | | | Additionally, our focus on enriching product | 2021 and, together with our DC in Fort | | pathways for all people managers. These | sustainable product and service solutions | | | | | | | DesignSpark opened its first innovation | content on our websites has contributed | Worth, US, is highly automated and | | range from essential management basics to | closer to our customers. This has been | | | | | | | centre in Texas, US, dedicated to incubating | towards accelerated search engine | provides significant room to increase | | skills masterclasses that attract more than | enhanced by our recent acquisitions. | | | | | | | and accelerating start-ups. Opened in | optimisation performance. | throughput, future-proofing our business | 300 people managers per month. RS PRO remains a key growth driver for the November 2021, the centre allows us to for the long term. We have improved our speed to market | We accelerated efforts to increase focus on | Group, with 19% like-for-like revenue growth | help start-ups to prove and grow their | | | | --- | --- | --- | --- | --- | | | | | when launching new products | We have strict financial, strategic and | | diversity and inclusion through the launch of | (up from 10% in 2020/21) and adding over | propositions. In return, the centre opens | | | | | | | through a focused marketing campaign | cultural targets when assessing inorganic | | a new global inclusion training module. By | 12,500 new products to its range including | further opportunities for the Group, giving | | | | | | | coordinated with a training programme | opportunities and are in a number of active | | standing together united for inclusion we | the launch of a recycled PLA 3D printer | us access to emerging technologies and | | | | | | | for our field-sales teams. | discussions. | | create a safe, inclusive and dynamic culture | filament created from recycled post-industrial | solutions that could in the future be applied | | | | where our people can thrive and grow. The | waste, offering customers not only | across our business. | Future initiatives | Future initiatives | | training was successfully received, with | high-quality products at competitive prices, | | We will continue to invest in technology and | We recognise the importance of investing | Future initiatives over 90% of desk-based employees having but environmentally friendly alternatives. automation to simplify processes, drive in our people, technology, processes and We continue to drive more innovation completed it. efficiencies and improve service where systems and will continue to prioritise the Future initiatives focusing our global effort on service we can across our business. right investments to achieve the optimum Future initiatives We continue to invest in building a truly solutions, in turn driving product purchases, balance between short and long-term value We will invest further in our people to differentiated and personalised offer with to differentiate ourselves and future-proof creation. We will continue to invest in a continue building a safe, inclusive and unrivalled product choice, specialist our business. sustainable way with a focus on limiting dynamic culture which enables our people technical support and solutions that make our environmental impacts. to bring their true self to work and thrive. our customers’ lives easier. We are also expanding our sustainable product range and profile online. 30 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 31 Strategic Report ### Our market and proposition ## Our growth ambition Well positioned for We see opportunities to continue to take market share across all our operating areas. We have demonstrated our resilience over recent years as our performance has decoupled from the market, being driven instead by our differentiated proposition. Our market outperformance results from selling more product and service solutions to existing and new customers, growing our branded and own-branded product range and leveraging our digital and data capabilities to improve our customer service and experience. ## growth in a large and ## We are accelerating organic growth by adding strategic acquisitions within: ## fragmented market ### Product and Product extensions Geographic ### service solutions and adjacencies opportunities • Making customers’ lives easier • Delivering a one-stop shop • Adding scale in key markets ## The markets we operate in • Providing innovative solutions • Offering a deeper and broader range • Growing under-represented countries • Reinforcing our differentiated offer • Providing greater product expertise • Being a global omni-channel provider ### Our distributor total addressable market Our revenue split by • Enhancing customer loyalty • Developing a strong own brand • Offering integrated supply globally ### (DTAM) opportunity product and service • Integrating products and services • Being an end-to-end specialist • Utilising existing capacity ### solutions £42bn £55bn ## We have a disciplined investment criteria £28bn ## Our growth remains primarily organic, supplemented by value accretive acquisitions Building where appropriate that fit culturally as well as strategically. ### TM ## RS Industria Electrical 21% | £27bn | Automation and control 23% | | Industrial customers increasingly | | --- | --- | --- | --- | | | Mechanical and fluid power 4% | | want a cost-effective way to monitor | | | Electronics 22% | Attractive market opportunity? | their operations to improve their | ## <1% | | Single-board computing 3% | | Make or buy? | business performance and | | --- | --- | --- | --- | --- | | share of DTAM | Facilities and maintenance 22% | | | | | | | Value creation potential? | | sustainability goals. | Other 5% Availability? TM £31bn Our response is RS Industria , our flexible industrial data platform that We estimate our DTAM of the provides continuous insight into the global maintenance, repair operational health and sustainability £2bn £217bn of industrial assets and equipment. and operations and HSE market is >£400bn and Using the expertise gained from our typically grows at GDP acquisition of Monition and leveraging our strong relationships with our global cloud-technology partners we ## Buy Build saw the opportunity to build a service that was not available in the market. Source: Texas A&M University and RS Group market research. The benefits of predictive maintenance include forecasting of component failure, scheduling maintenance time, coordinating the ## Key long-term trends driving our market delivery of appropriate replacement components and information on Increasing customer Solutions-driven offer Consolidation Increasing focus energy and water consumption. needs • Differentiates the proposition • Scale improves back-office on sustainability This is all rapidly delivered within • Customers want a superior from a high-volume distributor efficiencies • Increasing consideration a scalable, cyber-secure platform service • Increases customer loyalty • Volume-related buying of environmental impact that can easily be expanded across • Increasingly connected and transaction spend benefits • Restructuring of supply single or multiple sites. businesses (Internet • Drives product purchases • Deeper supply chain chain models of Things) partnerships • Greater focus on traceability • Data analysis to tailor service and accountability to customer needs 32 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 33 Group Strategic Report ### Stakeholder engagement ## Our people Suppliers Communities Shareholders Our people are fundamental to the success We work in partnership with our suppliers to Across our communities worldwide, we Our shareholders include individual of our business and we continue to invest deliver an unrivalled choice and innovative are implementing educational initiatives and institutional investors who provide in our ability to attract, develop and keep solutions for our customers. to improve lives and inspire the next the capital for our business to grow. the best talent. generation of engineers. What matters to them What matters to them ## Listening and What matters to them • Data-driven product management What matters to them • Sustainable growth and superior returns • High-performance, purpose-led culture • Knowledge of customer needs and trends • Supporting local communities • Understanding the business and • Diversity and inclusion • Ease of doing business • Providing educational initiatives to our strategy • Wellbeing and mental health • Offering full product ranges, services young people • Strong corporate governance ## responding to • Training and career development and solutions to our customers • Limiting environmental impact in operations • Environmental, social and governance • Positive environmental and social impact (ESG) How we engage How we engage and operating to high ethical standards | | • We encourage employee-led networks | | • Competitions to encourage innovation | How we engage | | --- | --- | --- | --- | --- | | our stakeholders | and communities | How we engage | • Delivering SuperSkills Employability | • Annual General Meetings | | | • Regular employee engagement surveys | • Dedicated account managers | Training | • Investor roadshows, detailed investor | | | and Non-Executive Director initiatives | • Regional and global supplier events | • Our exclusive Global Youth Advisory | events, meetings and conferences | | | • Training courses for all employees | • Supplier scorecards with defined targets | Board (The FAB15) | • Stock exchange announcements, | | | and managers | • Voice of Supplier survey every two years | • Organising and supporting community | press releases and results briefings | | | • Provision of online onboarding tool | • RS Connect – partnering with suppliers to | events and awards, including REflect our | • Ongoing dialogue with analysts | ## It is important for us to engage with our and revised processes connect with customers Diversity in STEM event and investors • Health and wellbeing resources ## key stakeholders to understand what is Outcomes of our engagement Outcomes of our engagement Outcomes of our engagement Outcomes of our engagement • Stronger partnerships with our suppliers • Won 2 Elektra Awards, Education Support • Share price reflective of business ## important to them and ensure we are | | • Upward trend in employee engagement | • Specialist product offering | Award and Best Campaign of the Year for | opportunities | | --- | --- | --- | --- | --- | | responsive to their needs and add value. | score to 75 | • Developing a programme to source, | the launch of our partnership with The | • Progressive dividend policy | | | • 284 people in our apprenticeship | store and deliver products closer to | Washing Machine Project (TWMP) | • Over 200 attendees at our 2022 Investor | | We value all of our stakeholders and their views are fundamental to us becoming | programmes | the customer | • 568 students received SuperSkills | Event: Our Journey to Greatness | | first choice and driving a long-term sustainable business. While most of our | • Voted one of the 2020/21 Inclusive Top 50 | • Won exporter of the year award at the | Employability Training | • ESG focused investor roadshows | | stakeholder engagement takes place on an operational level, our management | UK Employers | Business Champion 2022 Award | • 15 members on The FAB15, from 12 | • Won ‘company of the year’ category | | and Board also actively consider these stakeholders and the long-term impact | • Ranked in the top half of the FTSE 100 | | countries, working on four projects | at the plc awards 2021 | | our decision making has on them when setting and approving strategic decisions | Rankings 2021 Women on Boards and | | • £218k fundraised to the TWMP | | | respectively. How our Board considers our stakeholders is set out on pages 92 | in Leadership Review | | Foundation (including a corporate | | | to 95. Our section 172 statement can be found on page 83. | | | donation of £97,000 made in April 2022) | | and 500+ hours volunteered by our people ## Hear from our ## Customers Our people ## stakeholders It is crucial to understand our customers’ needs in order to create value, solve Knowing, understanding and listening to our stakeholders is problems and unlock opportunities. a key element of our day-to-day work. We interviewed some of our stakeholders for our recent Investor Event in March What matters to them 2022 asking them about their experience of RS Group. ## In making • Innovative and sustainable solutions to solve problems and unlock opportunities ## amazing happen • A seamless omni-channel approach so Shareholders Customers Our people they can concentrate on what they do best ## for a better world we • Ease of doing business Scan to watch what our ## need to understand • A partner to build a more sustainable and people have to say socially respons ble future ## the needs of all our • An unrivalled choice of products and ## stakeholders and the services and availability ## most effective ways to How we engage Our customers • Dedicated customer service ## engage with them. Scan to watch what some of • Omni-channel communication our customers have to say • Trade fairs and being on customer sites • Voice of the Customer survey, Trustpilot, Google customer feedback • Customer performance reviews Communities Suppliers Outcomes of our engagement Our supplier • Strengthened customer relationships Scan to watch what one of • Responsive and flexible proposition our suppliers has to say • Ease of business with our customers 34 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 35 Strategic Report ### Key performance indicators ## We use six financial key performance indicators (KPIs) ## Financial key ## to measure our progress in delivering the successful ## implementation of our strategy and monitor and drive ## performance our performance. Our financial KPIs reflect our ## strategic priorities as described on pages 30 and 31. ## indicators | | | 1 | | 1 | | 1 | | | 1 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Like-for-like | Adjusted | operating | Adjusted | operating | Adjusted | earnings | Return on capital | Adjusted | operating | Key to our principal risks (see pages 52 to 55) | | | revenue growth | profit conversion | | profit margin | | per share (EPS) | | employed (ROCE) | cash flow conversion | | Strategic risk category | | | | | | | | | | | | | 1 | Prolonged effects of the ongoing COVID-19 pandemic across | different geographies ## 26% 28.4% 12.5% 51.3p 28.7% 70.8% 2 Fail to respond to strategic market shifts, for example, changes in customer demands / compe itor activity and related stakeholder requirements | | | | | | | | | | | 28 7 | | 28.7 | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 26.3 | 25 8 | | | 11.7 | 11.3 | | | | | | | | | | | 23.6 | | | | 10.4 | | | | | | | 24.0 | | 83.1 | | | | | | | 22.0 | | | | | | | | | | | 3 | The Group’s revenue and profit growth activities are not successfully | | | | | | | | | 9.4 | 37 0 | 37.7 | | | | | | | 70.8 19.4 64.2 implemented 31.3 62.1 28.4 13 4 Effects on the business due to geopolitical developments 8 2 1 Operational risk category | | | | | | | 5 | Failure in the business’s critical infrastructure | | --- | --- | --- | --- | --- | --- | --- | --- | | Why this is important | Why this is important | Why this is important | Why this is important | Why this is important | Why this is important | | | | | | | | | | 6 | Cyber security breach / information loss | | By driving a differentiated | We are constantly striving to | A great customer experience, | Adjusted EPS is a measure | ROCE is a measure used by | By tight working capital | | | | | | | | | | 7 | UK defined benefit pension scheme cash requirements are more | | customer experience and | make our operating model as | high-performance team and | used by investors in deciding | investors in deciding whether to | management and disciplined | | | han the cash available | providing innovative solutions, | lean and efficient as possible so | operational excellence should | whether to invest in the | invest in the Company. A tight | capital investment, we aim to | | | | --- | --- | --- | --- | --- | --- | --- | --- | | we aim to drive market share | we can convert a higher | all drive improvement in | Company. It is a measure of the | focus on working capital control | convert a high percentage of | 8 | People resources unable to support the existing and future growth | | gains and higher revenue | percentage of gross profit into | adjusted operating profit | growth and profitability of the | and more disciplined capital | our operating profit into | | of the business | | growth, which in turn drives | adjusted operating profit. Our | margin. A higher adjusted | Company that also reflects | investment, coupled with | operating cash flow. Adjusted | | | | | | | | | | 9 | Impact on the business if the macroeconomic environment deteriorates | | profit growth. Like-for-like | aim is that each region, each | operating profit margin should | management performance. | increased profitability, will drive | operating cash flow conversion | | | | | | | | | | 10 | Potential impact on he business due to climate change effects | | revenue growth is adjusted for | market and each individual | drive higher returns for our | This is a performance measure | improved returns for our | is defined as adjusted free cash | | | | trading days, currency | takes respons bility for our | shareholders. It is adjusted | in our Long Term Incentive | shareholders. ROCE is | flow before income tax and net | | | | movements and to exclude the | performance and constantly | operating profit expressed as a | Plan (LTIP). | measured as adjusted operating | interest paid, as a percentage of | Regulatory / compliance risk category | | | impact of acquisitions until they | questions whether we can do | percentage of revenue. | | profit expressed as a | adjusted operating profit. The | | | | | | | | | | 11 | Fail to comply with international and local legal / regulatory | | have been owned for a year. | things more efficiently to drive | | | percentage of the monthly | higher the conversion the more | | | requirements This is a performance measure greater returns. average of net assets excluding cash we have available to invest in employees’ annual bonuses. net debt and retirement benefit in our business to drive future obligations. This is an underpin growth and returns for our in our LTIP. shareholders. Link to strategic priorities Link to strategic priorities Link to strategic priorities Link to strategic priorities Link to strategic priorities Link to strategic priorities • High-performance team • High-performance team • High-performance team • High-performance team • High-performance team • High-performance team • Best customer and supplier • Operational excellence • Best customer and supplier • Best customer and supplier • Operational excellence • Operational excellence experience • Innovation experience experience • Innovation • Reinvestment to accelerate • Innovation • Reinvestment to accelerate • Operational excellence • Operational excellence • Reinvestment to accelerate growth • Reinvestment to accelerate growth • Reinvestment to accelerate • Innovation growth growth growth • Reinvestment to accelerate growth Link to principal risks Link to principal risks Link to principal risks Link to principal risks Link to principal risks Link to principal risks 1. Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial 29 5 100.3 51.3 28.4 12.5 26 asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax (see Note 3 on pages 147 to 150 for reconciliations). 36 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 37 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 21/2220/2119/2018/1917/18 Strategic Report ### Key performance indicators continued ## We have eight non-financial KPIs to help ## Non-financial ## measure progress against our strategy. Following the launch of our 2030 ESG action plan – For a Better World, we have updated our ## key performance non-financial KPIs to reflect our new commitments and the relevancy to our business model. We still monitor, measure and report our prior KPIs, which are disclosed in the ESG section on pages 58 to 81. ## indicators ### Environment Customer People Health and safety | Carbon intensity | | Carbon emissions | | Packaging intensity | Waste | Group rolling | Employee | Percentage of | All Accidents | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | (tonnes of CO | 2 e due to Scope 1 | (tonnes of CO | 2 e due to Scope 1 | (tonnes / £m revenue) | (% of waste recycled) | | | | (per 200,000 hours) | | | | | | | | 12-month Net | engagement | management that | | | and 2 emissions / £m revenue) | | and 2 emissions) | | | | | | | | | | | | | | | Promoter Score | | are women | | (NPS) | 2.3 | | | 6,000 | | | 2 .11 | | | | | 73% | | | | | 50.6 | | | | | 75 | | | | | 32% | | | | 0.53 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 7.4 | | | | | | | 2.62 | | | | | | 79% | | | | 54.0 | 55.7 | 54.4 | | | | | 74 | 75 | | | 32% | | 1.02 | | | | | | | | | | | 2.52 | | | 76% | 75% | | 74% | | | | | | | | 7171 | 72 | | | | | | 30% | | | | | 6.8 | | | 12 400 | | | | | 2.43 | | | | | | 73% | 51.4 | | | | 50.6 | | | | | | | | | | | | | | | 6.3 | | | 11 900 | 2.25 | | | | | | | | | | | | | | | | | | | | | | | | | 0 88 | | | | | | | | | | | | 2.11 | | | | | | | | | | | | | | | | | 26% | | | | | 0.69 3.9 7 500 0.53 6,000 0.44 2.3 | | | | 21/2220/2119/2018/1917/18 | | 21/2220/2119/2018/1917/18 | | 21/2220/2119/2018/1917/18 | | 21/2220/2119/2018/1917/18 | | 21/2220/2119/2018/1917/18 | | 21/2220/2119/2018/19 | | 21/2220/2119/2018/19 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Why this is important | | | Why this is important | | Why this is important | | Why this is important | | Why this is important | | Why this is important | | Why this is important | | Why this is important | | | We recognise the role and | | | We are now targeting our | | Our aim is to provide the best | | Ensuring we are able to grow | | There is a strong correlation | | The fulfilment of our people in | | Empowering our people to bring | | We continue to make progress | | | responsibilities we have as a | | | absolute carbon reduction in | | customer experience in the | | and scale the business in a | | between high customer loyalty | | the workplace is a key priority. | | their true self to work creates a | | towards the long-term target of | | | global business to address our | | | line with our net zero action | | most sustainable way. We will | | sustainable way is key. We have | | scores and our financial | | Our aim is to increase employee | | culture of excellence where | | zero accidents on the basis that | | | environmental impacts and help | | | plan. This is a measure in our | | work across our network of | | moved to a single metric to | | performance. NPS is a | | engagement by building a | | everyone can thrive. Gender | | all accidents are preventable. A | | | tackle climate change. We are | | | sustainability-linked loan (see | | distr bution centres to reduce | | show not only what we recycle | | customer satisfaction measure. | | diverse and customer-centric | | diversity in leadership is a key | | safe working environment is | | | decoupling our business growth | | | page 48 for more details) and | | packaging use, while increasing | | but what we also reuse. We | | Achieving consistently strong | | culture and offering the right | | action of our 2030 ESG plan | | important for the wellbeing of | | | from our carbon footprint and | | | will be a performance measure | | recycled content and | | implement waste reduction | | customer satisfaction ratings is | | training and development | | and therefore a new non- | | our employees and the success | | | thus our carbon intensity | | | in our employees’ 2022/23 | | recyclability. This is a measure | | initiatives internally and by | | a key priority and will help drive | | opportunities. Having more | | financial KPI we have added | | of our business. | | | continues to decline. We are | | | annual bonus. | | in our sustainability-linked loan | | working with our suppliers. | | stronger financial performance. | | engaged employees reduces | | this year. Our baseline for | | | | | extending our use of renewable | | | | | (see page 48 for more details). | | | | NPS fell during 2021/22 due to | | staff turnover, improves | | gender diversity in management | | | | | electricity while maintaining | | | | | | | | | longer lead times from | | productivity and helps us better | | is 2018/19, to align with a global | | | | | a focus on energy efficiency | | | | | | | | | COVID-19 and its variants, the | | serve our customers. | | people grading system that was | | | | | programmes. | | | | | | | | | UK leaving the European Union | | | | introduced in the year. This is a | | | | | | | | | | | | | | and industry supply shortages. | | | | measure in our sustainability- | | | | | | | | | | | | | | This is a performance measure | | | | linked loan (see page 48 for | | | | | | | | | | | | | | in employees’ annual bonuses. | | | | more details). | | | | | Link to strategic priorities | | | Link to strategic priorities | | Link to strategic priorities | | Link to strategic priorities | | Link to strategic priorities | | Link to strategic priorities | | Link to strategic priorities | | Link to strategic priorities | | | • High-performance team | | | • High-performance team | | • High-performance team | | • High-performance team | | • High-performance team | | • High-performance team | | • High-performance team | | • High-performance team | | | • Innovation | | | • Innovation | | • Best customer and supplier | | • Best customer and supplier | | • Best customer and supplier | | | | | | • Operational excellence | | | • Operational excellence | | | • Operational excellence | | experience | | experience | | experience | | | | | | | | | | | | | | • Innovation | | • Operational excellence | | • Innovation | | | | | | | | | | | | | | • Operational excellence | | • Innovation | | | | | | | | | | 13 500 | | 32% | | | | | | | | | | | | | | | | | Link to principal risks | | | Link to principal risks | | Link to principal risks | | Link to principal risks | | Link to principal risks | | Link to principal risks | | Link to principal risks | | Link to principal risks | 38 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 39 17/18 21/2220/2119/2018/1917/18 Strategic Report ### Business review ## “I’m very proud of the hard ## EMEA ## work and coordination between ## We have seen a significant benefit ## our teams in maintaining good ## from operating a more cohesive ## product availability globally ## team across EMEA and are ## despite the external industry ## excited by the operational and ## supply chain challenges.” ## environmental benefits we can Pete Malpas Elaine Pointon President, Chief Finance Officer, ## Mike England deliver in Europe from our EMEA RS Components EMEA RS Components Chief Operating Officer ## extended DC in Germany. EMEA accounts for 62% of Group revenue and is managed across some instances, particularly in the first half, new business rollout the key markets of: UK and Ireland; France; Italy; Iberia; Germany, was delayed due to lockdowns restricting our teams moving onto Austria and Switzerland; and rest of EMEA which includes Benelux, our customers’ sites. We have seen reduced trading activity from ## Regional performance Eastern Europe, Scandinavia, South Africa and our export business some of our major customers within the heavy industry sector and (covering 32 international distribution partners servicing 82 thus disproportionately hit by COVID-19. Our new customer wins countries). We do not have operations in Russia or Ukraine. During are across a wider industry range. We are excited about being the year, we traded under our key brand names of RS, RS PRO, able to provide our integrated supply offer across Europe and now changing customer needs and priorities, deepening our relationship OKdo, IESA, Needlers and Liscombe. A broad range of products, globally as we work closely with our integrated supply business in Overall results as a trusted partner to both our customers and our suppliers. Our high inventory availability and specialist expert service are key Americas, Synovos, on joint tenders. Like-for-like 1 2022 2021 Change change customer base continues to increase and the breadth of our product priorities for our customers. We differentiate our offering by • Digital, accounting for 71% of the region’s revenue, outperformed offer and strong availability has meant that we are also seeing an providing a best-in-class online experience, supported by a with 23% like-for-like revenue growth as greater focus was placed Revenue £2,553.7m £2,002.7m 28% 26% increase in average order values across all regions. The more knowledgeable sales force, technical expertise, 24/7 customer on driving organic growth through search engine optimisation Gross margin 44.2% 42.7% 1.5 pts 1.7 pts difficult supply environment has meant that online journeys have support and a range of product and service solutions. Delivering on marketing, improving content and greater focus on delivering Operating profit £308.8m £167.2m 85% 97% been supported more often by sales teams as customers seek these drives stronger customer relationships, higher average order greater lifetime customer value. Our mobile responsive website 2 Adjusted operating reassurance about availability and lead times. We have seen a values and operational efficiencies. has delivered a significant improvement in how easily our profit £320.4m £188.3m 70% 78% significant increase in supplier lead times but only a slight customers can search, find and order with us in real time during 2 Adjusted operating Overall results worsening in our order availability to customers. Our on time to their production process. Web revenue grew 25% on a like-for-l ke | profit margin 12.5% 9.4% 3.1 pt s 3.7 pts | | | | | | 1 | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Like-for-like | | | basis. We also saw a recovery in our eProcurement business due | | | 2 | promise metric was 86% for the three months ended 31 March 2022. | | | | | | | Adjusted | operating | | 2022 2021 Change | | change | | | to increased activity from our larger customers. profit conversion 28.4% 22.0% 6.4 pts 7. 5 pts Customer experience remains a core focus for the business as we Revenue £1,579.5m £1, 277. 4 m 24% 22% • RS PRO, which accounts for 18% of the region’s revenue, improve ease of use, personalisation, sales and technical expertise Operating profit² £243.7m £172.6m 41% 46% 1. Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue performed well with 17% like-for-l ke revenue growth, against a and maintain relatively high inventory availability. Our Group rolling also adjusted for trading days (see Note 3 on pages 147 to 150 for reconciliations). Operating profit strong comparative period last year, less exposure to the fastest 2. Adjusted excludes amortisation of intangible assets arising on acquisition of 12-month Net Promoter Score (NPS), a measure of customer margin 15.4% 13.5% 1.9 pts 2.5 pts growing industrial component product ranges and a lower businesses, acquisition-related items, substantial reorganisation costs, substantial satisfaction, fell to 50.6 (2020/21: 54.4). This was due to the electronics weighting. asset write-downs and one-off pension credits or costs (see Note 3 on pages 147 to 1. Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue external pressures our business faced including the COVID-19 150 for reconciliations). also adjusted for trading days. • OKdo, which accounts for 4% of revenue in the region was flat on pandemic, Brexit fallout and industry supply shortages, with our 2. See Note 2 on pages 145 and 146 for reconciliations to Group operating profit. a like-for-like basis with growth impacted by extreme supply Our strong revenue performance across all three regions is due to revenue and order metrics suggesting relative market constraints since the second quarter. the hard work of our teams and the strength of our differentiated outperformance. We are working hard on improving this score, • Overall, EMEA revenue grew 24%, 22% on a like-for-like basis, to • Supply shortages were a significant challenge across the region offer. We are gaining share in all major markets as we focus on the which is part of our employee incentive plans and core to our £1,579.5 million (2020/21: £1,277.4 million), benefiting from an as demand recovered before manufacturing capacity resumed core basics: who are our customers, what do they need and how customer-centric strategy. We have developed our digital improved market backdrop, operational model and sales focus. fully. However, we maintained relatively stable levels of availability can we solve their procurement problems. During a time of extreme capabilities further to provide our customers with more information Industrial production data shows that we continued to gain share due to forward planning, our close relationships with suppliers and uncertainty, being able to deliver on those fundamentals has been on availability and lead times and seen greater interaction with our during the year as the security of our offer, in terms of product investment in our inventory position. We were able to limit as key in developing closer relationships with our customers and sales teams; a benefit of our omni-channel model. However, we availability and financial strength, resonated with customers with much of the supply disruption as possible through utilising our increasingly becoming a one-stop shop. note that the supply chain issues and geopolitical uncertainties both average order value and average order frequency improving. experience that we gained during Brexit, rerouting transport, continue to worsen. Our investment into areas such as product and service solutions, • UK and Ireland, which accounts for c. 40% of the region’s advancing orders, increasing local sourcing and holding greater digital, inventory and our distr bution centre (DC) infrastructure has revenue, performed well but slightly below the region’s overall inventory as a buffer. Although our teams worked hard to mitigate meant that we have been able to navigate successfully not only performance due to lower industrial production growth. The industry-wide supply challenges and the effect of Brexit, there COVID-19 and its variants but also the UK leaving the EU (Brexit), summer months were impacted by labour shortages relating to continued to be unavoidable impacts on delivery lead times external industry supply challenges and inflationary pressures. Our COVID-19 restrictions with supply constraints impacting some especially across the UK border and inventory availability. EMEA’s ## A greener DC industrial experience and strong relationships allowed us to identify industry verticals, especially those in heavy industry. Our peer rolling 12-month NPS was 48.6 (2020/21: 55.5). the supply issues in the market early and partner closely with our analysis suggests we increased market share significantly. • Gross margin has benefited from product management work to In September 2021, we opened our expanded and upgraded suppliers to secure and invest appropriately in greater levels of • Germany saw good momentum and market share gains. We have reduce the level of discounting, set appropriate prices given DC in Bad Hersfeld, Germany. The expansion was part of our inventory. This ensured we maintained good product availability a new German management team which has driven new sales inventory turn and pass-through cost of goods inflation. There is a ambition to build a more scalable, sustainable and despite global supply constraints. strategies and focus. Performance during the period was helped small dilutive impact from our acquisitions of Needlers Holdings customer-centric supply chain. Spanning 37,600m², the by a slightly larger electronics product bias. Our enlarged DC Limited and John Liscombe Limited which operate at a lower All regions have seen operating profit margin improvement, most expanded state-of-the-art DC can now accommodate c. opened for first stage commissioning at the end of September and gross margin given their personal protective equipment exposure. notably in Asia Pacific. This was achieved by revising our discount 500,000 products and deploys best-in-class technology to is being slowly brought up to full stage working. The facility is • Operating profit improved 41%, up 46% on a like-for-like basis, to policy, ensuring pricing options reflect demand elasticity, improving help deliver a significantly lower carbon footprint. highly automated which allows us to improve our sustainability £243.7 million (2020/21: £172.6 million). our own-brand ranges and negotiating better buying terms to drive performance, reduce our environmental impact and increase • Operating profit margin improved 1.9 percentage points to 15.4% gross margin benefits. We have also delivered operational The expansion of the site brings products closer to our efficiency. We will also be able to broaden our product range and (2020/21: 13.5%), despite extra costs relating to Brexit from higher improvements as we focused on becoming more agile and European customers. This reduces our transport emissions offer service solutions to European customers. outbound freight costs, cost inflationary pressures and continual streamlined, a beit these were partly offset by freight, energy and by minimising distances our products travel and we are also • Our business in France benefited, as a result of flattening the investment in our operating model. We are driving a lower cost to labour inflation and ongoing investment in our people, digital transitioning to lower-carbon modes of distribution. The reporting structure in EMEA, from greater end-to-end ownership serve and generating operating profit conversion improvements. capabilities, technology and customer experience. increased automation at the facility is also helping achieve by the team and some additional inventory within the French DC. additional energy savings and packaging waste reductions. We have seen increased collaboration across the business as • IESA continues to win new contracts and the pipeline is very regional heads adapt global expertise and best practice to suit local strong especially within Europe where we have invested in needs. Regions are empowered to react quickly to support developing our coverage and reach over the last two years. In 40 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 41 Strategic Report ### Business review continued ## Americas Asia Pacific ## Investment in our organisational We are so proud of our people and ## capabilities has driven our their commercial focus in delivering ## outperformance. There are a significant increase in our revenue ## significant opportunities to and operating profit margin. We see ## accelerate our growth further as Ken Bradley Manisha Kadoche many more growth opportunities as Sean Fredericks Ellen Li President, Chief Finance Officer, President, Chief Finance Officer, ## we embrace our stronger product we develop our offer further based Allied Electronics & Allied Electronics & Asia Pacific Asia Pacific Automation Automation RS Components RS Components ## and service solutions proposition. on our growth accelerators. Americas accounts for 28% of Group revenue, with Allied Electronics integrated supply solution; one of the first operators able to do Asia Pacific accounts for 10% of Group revenue and consists of including a more focused sales force, have supported a recent & Automation (Allied), Synovos, RS PRO and OKdo being our this. During the year, Synovos experienced delays in Australia and New Zealand (ANZ), Greater China, Japan and improvement in the monthly NPS trend. trading brands during the year. We have operations in the US, implementing new contracts due to COVID-19 lockdowns Korea, and South East Asia. RS, RS PRO and OKdo are our main • Gross margin growth was driven by greater focus on higher together with smaller operations in Canada, Mexico and Chile. Our restricting access to customers’ sites. We have seen lower trading brands in Asia Pacific. Our broadening product offer, strong revenue opportunities, implementation of the small order handling DC expansion completed in 2020/21 enables us to continue to widen revenue from existing customers during the pandemic and a technical expertise, omni-channel service and a growing range of charge and price increases. our product offering further into the maintenance, repair and smaller margin contr bution due to some fixed price contracts. product and service solutions underpin our market share growth. • Operating profit was £29.3 million, a significant improvement operations (MRO) market. We are driving ongoing gains from the Additionally, we have incurred costs relating to personnel changes This allows us increasingly to become a one-stop-shop partner of on the prior year which delivered £1.4 million. changes we have made in recent years to focus our sales teams on and improving the commercial operating model to become more choice for our customers. • The operating profit margin of 11.5% was a 10.8 percentage identifying new revenue generating opportunities, utilising our shared aligned with IESA. This will provide the opportunity to scale more points improvement (2020/21: 0.7%), benefiting from strong expertise across the Group and continuing improvements to our quickly and efficiently to take advantage of the growth we see. We Overall results revenue growth, gross margin gains, continued cost discipline digital proposition. This is resulting in greater customer engagement have already signed a number of new contracts with global Like-for-like 1 and our scalable operating model. The region remains focused 2022 2021 Change change and marketing returns. Synovos, Inc. the integrated supply business companies in the technology and pharmaceutical verticals and we on improving our cost to serve, reducing freight costs by shifting we acquired in January 2021, is driving cross-business benefits as are pleased with Synovos’s integration into the Group. We see Revenue £255.5m £208.3m 23% 27% shipments from air to sea and leveraging our operational assets. the Group becomes a supplier to its customers, RS PRO products more opportunities for cross-business benefits including Operating profit² £29.3m £1.4m >200% >200% provide a competitive alternative to the branded ranges and we offer expanding our RS PRO reach. Operating profit transatlantic integrated supply solutions with IESA. • Americas’ rolling 12-month NPS declined 8% to 66.0 (2020/21: margin 11.5% 0.7% 10.8 pts 11.4 pt s 71.9), largely due to external pressures including the pandemic ## Overall results 1. Like-for-like adjusted for currency; revenue also adjusted for trading days. Central costs and supply chain disruption plus the significant increase in volume 1 2. See Note 2 on pages 145 and 146 for reconciliations to Group operating profit. Like-for-like throughput. Our focus remains on delivering a strong offline and Central costs are Group head office costs and include Board, 2022 2021 Change change online customer experience and mitigating the industry issues we Group Finance and Group Professional Services and People costs Revenue £718.7m £517.0 m 39% 36% • Asia Pacific revenue increased 23%, 27% on a like-for-l ke basis, are facing. that cannot be attributed to region-specific activity. to £255.5 million (2020/21: £208.3 million). Operating profit² £99.3m £51.9m 91% 98% • Gross margin grew due to a strong product margin focus to Like-for-like 1 • A change in management culture has led to more focused and | Operating profit | reduce the level of discounting and improve price optimisation | | | | | --- | --- | --- | --- | --- | | | | | 2022 2021 Change | change | | margin 13.8% 10.0% 3.8 pts 4.5 pts | | productive sales processes as we have increased attention on | | | across our products. Central costs £(51.9)m £ (37.6) m 38% 38% • Operating profit improved 91%, 98% on a like-for-like basis, to more profitable opportunities to drive a significant improvement in 1. Like-for-like adjusted for currency and to exclude the impact of acquisitions; revenue £99.3 million (2020/21: £51.9 million). average order value. This has delivered an improved revenue 1. Like-for-like adjusted for currency. also adjusted for trading days. • Operating profit margin improved 3.8 percentage points, performance, helped by a stronger participation of our electronics 2. See Note 2 on pages 145 and 146 for reconciliations to Group operating profit. 4.5 percentage points on a like-for-like basis, to 13.8% (2020/21: product range, and margin gains. Our industrial product • Central costs increased by £14.3 million to £51.9 million (2020/21: 10.0%) a function of larger volumes, gross margin gains and performance has also remained strong and we have continued to • L ke-for-like revenue grew 36%, underpinned by a strong market £37.6 million) due to higher costs related to prospective operational leverage due to the strong revenue growth. take market share. and the investment we have made over the last few years in our acquisitions, investment in future growth opportunities and higher • Japan and Korea has benefited from a new president, greater people, operating model and DC. We are seeing strong growth in performance-related incentives and share-based payments. understanding of the local customer needs and improved the automation and control product range and are extending our customer service. Greater China has enhanced business proposition into the MRO market. Our growth has been similar opportunities, with the sales team focused on increasing the across industrial and electronic products, with demand for the average order value and higher margin revenue opportunities, latter being driven by our industrial customers as we provide product experience and expertise to customers where we although the recent lockdowns have impacted delivery. South Reducing our carbon ## Unlocking our digital understand their business requirements and needs. East Asia’s performance improved in the second half as local • We have significantly invested in our people and culture, digital COVID-19 lockdowns eased and we continued to gain share. ## footprint ## opportunity and marketing proposition, and product and service offer. Our ANZ’s performance in recent months has benefited from new sales force, management and teams are better aligned to revenue contracts and high margin RS PRO growth. Our improvement in performance and operating profit margin In Americas, we have invested in our technical infrastructure and margin growth which form part of their incentive plans. Field • OKdo, which accounts for 8% of the region’s revenue, declined in Asia Pacific has been achieved concurrently with pursing to enhance our digital platform capabilities and the digital sales teams are now focused on customer acquisition and 10% on a like-for-like basis having been impacted by shortages in our environmental, social and governance (ESG) goals. touch points in our customers’ journey. This included retention, as well as expanding our product proposition and RS the second half of the year. deploying significant enhancements such as self-service A small order handling charge was implemented at the PRO participation, supported by a central customer service team • Digital, which accounts for 61% of the region’s revenue, increased capabilities and real-time user feedback. beginning of this year to encourage customers to consolidate providing specialist support and dealing with administrative tasks. 37% on a l ke-for-like basis driven by digital share gains in Japan • Digital accounted for 43% of the region’s revenue, with 37% their orders to reduce unnecessary deliveries, save energy We have also introduced our virtual demo lab in Fort Worth, and Korea, Greater China and South East Asia, which all saw a like-for-l ke growth. L ke-for-like growth in web revenue was 45% consumption and reduce carbon emissions. This led to an US where we have been able to combine the strength of our strong recovery in eProcurement. Web like-for-l ke revenue also illustrating the strength of our offer and the investment we have increase in the average order frequency and average order people with virtual technical expertise to showcase new grew by 37%. made in our digital platform to improve site speed and search value, with minimal change in customer numbers. This action products and services to our customers, providing usage, • RS PRO, which accounts for 13% of the region’s revenue, saw engine optimisation. also helped to reduce the carbon intensity of sales to technical and compatibility information on a one-to-one strong like-for-like growth of 26%, with growth strong across all 2 • RS PRO accounts for under 1% of the region’s revenue and grew customers in Asia Pacific by 17% in 2021/22, from 2020/21. virtual basis. markets. like-for-l ke revenue by 37%. The performance has been held • Asia Pacific’s rolling 12-month NPS of 36.7 (2020/21: 37.4) has We continue to source and stock more products locally so Increasingly, we are utilising our data, product expertise and back by the facts that the RS PRO brand is less well known to our been impacted by longer supply lead times and our decision to that we reduce our freight costs, lead times and carbon Americas customers and has an MRO focused range, rather than customer knowledge to personalise our digital offering, implement delivery charges for some small value orders which footprint with fewer international freight dependencies. automation and control. We expect to benefit from the Group thereby solving our customers’ needs and building a have low levels of profitability. We remain committed to improving rebranding as we move towards becoming RS Americas, while world-class customer experience. 2. Tonnes of CO 2 e due to Scope 3 transport emissions per £m sales the customer experience and actions we have implemented, the movement into more MRO products will also help. • We are very excited about the opportunities the acquisition of Synovos brings. Together with IESA, we are able to offer a global 42 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 43 Strategic Report ### Financial review Revenue ## “Our profit performance has Group revenue increased by 28% to £2,553.7 million (2020/21: ## £2,002.7 million). Adjusting for the year-on-year impact of Driving sustainability ## been exceptional despite acquisitions of £94.8 million, £10.5 million from additional trading ## the challenging market and days and a negative impact of £62.7 million from exchange rate across finance movements, like-for-l ke revenue growth was 26% of which volumes ## ongoing investment in our and mix accounted for c. 19%. Revenue momentum was strong On 29 October 2021, we amended our revolving credit across the year, with second half like-for-like growth of 22% despite facility to a sustainability-linked loan to coincide with the ## operational capabilities to tougher comparatives as the economy recovered from the initial November 2021 launch of our 2030 ESG action plan – For COVID-19 pandemic impact. a Better World. ## support our growth ambitions.” Industrial production figures, supplier indications and results We worked together with our banking partners to leverage David Egan reported by peers show that we are outperforming the industrial the opportunity to embed ESG within our financial facilities market and gaining share as our customers have relied on our and develop an instrument that reflected our ESG goals. Chief Financial Officer product availability, the breadth of our range and our experienced We selected three of our most material ESG team to deliver products and services in time to ensure their trading actions including: continuity. We have seen a 1% increase in our total customer • Scope 1 and 2 CO 2 e emissions – as part of our ambition Revenue Operating profit numbers. Our average order value grew by 10% (excluding our to be net zero in our direct operations by 2029/30 integrated supply business’s pass-through sales orders) with the • Packaging intensity – as part of our action to reduce majority of the growth driven by an increasing number of products ## Our financial our packaging intensity by 30% by 2029/30 ## £2,554m £309m within our customers’ baskets. • Percentage of management that are women – as part Change: +28% Change: +85% Our industrial products ranges, which account for c. 75% of Group of our action to work towards 40% of our leaders being 2020/21: £2,003m 2020/21: £167m revenue, grew by 24% l ke-for-like during the year with strong female by 2029/30 ## performance growth across all our industrial product ranges. Our electronic Linking our revolving credit facility to our ambitious ESG 1 2 products range, predominantly supplied to our industrial customers Like-for-like Adjusted operating action plan demonstrates our commitment to integrate ESG as they become more digitalised and connected, grew by 43% on revenue growth profit into all aspects of our business and supports our purpose a like-for-l ke basis benefiting from strong market conditions, our ## and position of making amazing happen for a better world. product availability and new customers. OKdo, the Group’s single-board computing (SBC) and Internet of Things (IoT) ## 26% £320m business, which accounts for c. 3% of revenue, declined by 3% on 1 2020/21: 1% Like-for-like change: +78% a like-for-l ke basis as supply tightened from the second quarter. 2020/21: £188m RS PRO, which is our main own-brand product range and accounts Gross margin for 12% of Group revenue, grew by 19% on a l ke-for-like basis, 2 Group gross margin increased 1.5 percentage points to 44.2%, Adjusted operating despite having a limited electronics offer, fewer automation and (2020/21: 42.7%). Excluding the dilutive impact from our recent Net debt profit margin control products and a very small participation within Americas. acquisitions and the small benefit from exchange rates, the Our offer continues to gain traction with our performance aided by like-for-like growth was 1.7 percentage points which includes a targeted product marketing and new product development. We have 0.6 percentage points benefit from last year’s one-off inventory ## £42m 12.5% a strong product line-up and are excited about the opportunities to provision relating to the decline in price of certain personal 2020/21: £122m 2020/21: 9.4% drive stronger revenue across the Group. protective equipment (PPE) products bought at the start of Digital, accounting for 62% of Group revenue, performed slightly the pandemic. ahead of the Group overall, delivering 27% like-for-like growth. We have taken actions to improve our gross margin through Web revenue, which is a truer representation of our digital revising our discount policy, ensuring pricing options reflect demand proposition and demand as it excludes eProcurement, grew by elasticity, improving our own-brand ranges and negotiating buying 30% on a like-for-like basis. eProcurement and other digital, which terms better. We are delivering gross margin benefits although this are used predominantly by our larger customers who suffered is being partly offset by regional and product mix dilution and heavily during lockdowns, have recovered strongly with 21% ongoing pressures from inbound freight inflation. growth on a like-for-like basis. Overall results The dilutive impact from acquisitions reflects the lower digital We continue to redirect our digital marketing spend away from paid Like-for-like 1 participation within the acquired businesses compared to our advertising towards organic marketing which is driving a better 2022 2021 Change change Group model. We expect this dilutive impact to reduce over time return on our investment. We have seen efficiency improvements in Revenue £2,553.7m £2,002.7m 28% 26% as integration continues. our key marketing channels as we have focused more on marginal Gross margin 44.2% 42.7% 1.5 pts 1.7 pts return on investment rather than purely on revenue, a result of the Operating profit £308.8m £167.2m 85% 97% investment we have made in increasing the digital expertise within 2 Adjusted operating profit £320.4m £188.3m 70% 78% our teams. We have also benefited from promoting a ‘test and learn’ 2 Adjusted operating profit margin 12.5% 9.4% 3.1 pt s 3.7 pts environment, resulting in quicker, less risky development changes. 2 Adjusted operating profit conversion 28.4% 22.0% 6.4 pts 7. 5 p t s Profit before tax £302.2m £160.6m 88% 102% 2 Adjusted profit before tax £313.8m £181.7m 73% 81% Earnings per share 48.9p 27.7p 77% 90% 508.4 2,553.7 2 Adjusted earnings per share 51.3p 31.3p 64% 72% 94.8 | Cash generated from operations £267.1m £231.1m 16% | | 2 002.7 | | 10 51 940 0 | | --- | --- | --- | --- | --- | | | 2 | | (62 7) | | | Adjusted | free cash flow £162.9m £145.4m 12% | | | | 2 Adjusted operating cash flow conversion 70.8% 100.3% (29.5) pts Net debt £42.1m £122.0m 2 Net debt to adjusted EBITDA 0.1x 0.5x Like-for-like revenue development (£m) Return on capital employed 28.7% 19.4% 20/21 Currency 20/21 at Trading Acquisitions Like-for- 21/22 Dividend per share 18.0p 15.9p 13% revenue movement constant day like growth revenue 1. Like-for-like change excludes the impact of acquisitions and the effects of changes in exchange rates on translation of overseas operating results, with 2020/21 converted at exchange movement +26% 2021/22 average exchange rates. Revenue is also adjusted to eliminate the impact of trading days year on year. Acquisitions are only included once they have been owned for a year, at which point they start to be included in both the current and comparative periods for the same number of months (see Note 3 on pages 147 to 150 for reconciliations). 2. Adjusted excludes amortisation of intangible assets arising on acquisition of businesses, acquisition-related items, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and associated income tax (see Note 3 on pages 147 to 150 for reconciliations). 44 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 45 rates Strategic Report ### Financial review continued Operating costs Adjusted operating costs as a percentage of revenue decreased by Net finance costs Cash flow Total operating costs, which include regional and central costs, 1.7 percentage points to 31.6% (2020/21: 33.3%). Our improved Net finance costs were £7.1 million (2020/21: £6.8 million) with less We remain a robust cash generative business, benefiting from increased by 19%. Excluding amortisation of acquired intangibles trading momentum and steps taken to simplify our operating model interest capitalised as our DC expansions were completed. A high actions we took to increase our focus on cash at the start of and the substantial reorganisation costs and acquisition-related to drive efficiencies have driven higher conversion of gross profit proportion of our debt is at fixed interest rates and with low floating COVID-19. Cash generated from operations was £267.1 million items incurred in 2020/21, total adjusted operating costs increased into operating profit, with adjusted operating profit conversion deposit interest rates there has been little benefit seen from our (2020/21: £231.1 million) with higher EBITDA mainly offset by by 21%, 19% on a l ke-for-like basis, to £807.5 million (2020/21: 6.4 percentage points higher at 28.4% (2020/21: 22.0%). We remain lower net debt. movements in working capital as we increased our inventory levels. £667.7 million). Two thirds of this increase is volume driven or committed to The RS Way target of a 30% adjusted operating profit As a result, adjusted operating cash flow conversion was 70.8%, Profit before tax relates to the annualisation of the operating costs of last year’s conversion and focused on achieving our aspiration of a mid-teen a decline of 29.5 percentage points year on year. Profit before tax was up 88% to £302.2 million (2020/21: acquisitions. adjusted operating profit margin. £160.6 million). Adjusted profit before tax was up 73% to Net interest paid decreased by £1.3 million to £7.0 million (2020/21: At the moment, we see no indications that the elevated costs we Items excluded from adjusted profit £313.8 million (2020/21: £181.7 million), up 81% on a l ke-for-like £8.3 million) as 2020/21 included the payment of the fees for have experienced since the start of the COVID-19 pandemic will To improve the comparability of information between reporting basis. refinancing our revolving credit facility. unwind. The UK leaving the EU (Brexit) has led to additional periods and between businesses with similar assets that were Income tax paid increased to £57.1 million (2020/21: £35.2 million) brokerage and air freight costs to ensure timely delivery and greater internally generated, we exclude certain items from adjusted profit due to taxable profit being higher than 2020/21. Also 2020/21 administrative expenses relating to border and custom checks. measures. The items excluded from 2021/22 are described below. benefited from the utilisation of some prior year overpayments. Higher energy and fuel costs are affecting all three regions. Freight In 2020/21 we also excluded substantial reorganisation costs of rates have, in some instances, been impacted by premium fees to £11.2 million, primarily labour-related restructuring costs to Net capital expenditure decreased to £42.5 million (2020/21: expedite shipments given the shortage of containers and we are implement RISE, and £2.9 million of acquisition-related items. £54.7 million) due to Americas DC expansion completing in 2020/21 also seeing fuel surcharges. Our parcel delivery charges have See Note 3 on pages 147 to 150 for definitions and reconciliations and Germany DC expansion moving to early-stage commissioning increased in the UK. of adjusted measures. during the third quarter. Additionally, some capital expenditure was held back as we prioritised our Journey to Greatness plans. Capital We are managing what we can control, which includes working Amortisation of acquired intangibles expenditure was 1.3 times depreciation (2020/21: 1.7 times) moving partly to mitigate this by storing our product closer to the customer, Amortisation of acquired intangibles was £11.6 million (2020/21: more in line with our typical maintenance capital expenditure levels but this is taking time to achieve. It is anticipated that our newly £7.0 million) and relates to the intangible assets arising from of closer to 1.0 – 1.5 times depreciation. We anticipate capital commissioned Bad Hersfeld DC in Germany will reduce some of acquisitions. expenditure in 2022/23 to be £50 – 60 million as we resume these costs over time. our ongoing investment schedule. Operating profit A large proportion of our operating costs relates to our people. Operating profit increased by 85% to £308.8 million (2020/21: Free cash flow increased to £160.5 million (2020/21: £132.9 million). We awarded a pay rise across the Group early in the year but are £167.2 million). Excluding the year-on-year impact of acquisitions Excluding cash outflows of £2.4 million (2020/21: £12.5 million) seeing inflationary pressures build given general employment and the negative impact of currency movements, adjusted operating related to substantial reorganisation costs and acquisition-related shortages across all specialist areas, including technology, and profit saw a like-for-l ke increase of 78%. Adjusted operating profit Taxation items in 2020/21, adjusted free cash flow was £162.9 million within our US and UK DCs. Our employee retention rate is 90%, margin improved 3.1 percentage points to 12.5%. The Group’s income tax charge was £72.2 million (2020/21: (2020/21: £145.4 million). and we are mindful of the competitive pressures for new talent. £35.1 million). The adjusted income tax charge, which excludes the impact of tax relief on items excluded from adjusted profit before Operating costs increased to strengthen our expertise, tax, was £72.3 million (2020/21: £39.6 million), resulting in an technological capabilities and product and services capacity, and Summary cash flow effective tax rate of 23.0% on adjusted profit before tax (2020/21: improve our operating basics. We want to be the best in class in 138 3 320.4 £m 2022 2021 21.8%). The increase is predominantly due to a recalculation of each of our disciplines and will invest in our business to ensure it Operating profit 308.8 167. 2 deferred tax balances as a result of the UK corporate income tax can support the strong organic growth we are delivering and the change from 19% to 25% effective from 1 April 2023 but enacted Add back depreciation and amortisation 63.7 56.5 inorganic opportunities we see on our Journey to Greatness. 188 3 5.3 176.8 earlier this year. EBITDA 372.5 223.7 Our RISE programme to simplify the Group remains on track. We (11.5) Add back loss on disposal of non-current assets 2.4 0.3 are excited by the benefits we see from having a more agile Earnings per share Movement in working capital (116.2) (1.5) business and leaders with greater operational focus and ownership. Earnings per share was up 77% to 48.9p (2020/21: 27.7p). Adjusting Movement in provisions (1.7) 1.6 We have delivered c. £15 million of benefits in 2021/22 due to the for items excluded from adjusted profit and associated income tax | | 20/21 | Currency | 20/21 at | Acquisitions Like-for- | | 21/22 | | Other 10.1 7.0 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | flatter regional management structure and sharing our business | | | | | | | effects, adjusted earnings per share of 51.3p (2020/21: 31.3p) grew | | | | adjusted | movement | constant | | like growth | adjusted | | | Cash generated from operations 2 67.1 2 31.1 functions across the Group including marketing, digital, innovation exchange +78% operating 72% on a like-for-l ke basis. operating Net interest paid (7.0) (8.3) and product and supplier management. This simpler operating Income tax paid (57.1) (35.2) model has allowed us to adapt to change faster, improve margins Net cash from operating activities 203.0 187.6 and operate more efficiently. We can see from the work to date that there are more opportunities to improve our differentiated business Net capital expenditure (42.5) (54.7) model further and be better at the basics to increase our operational Free cash flow 160.5 132.9 1 leverage. Add back cash effect of adjustments 2.4 12.5 1 Adjusted free cash flow 162.9 145.4 1. Adjusted excludes the impact of substantial reorganisation and acquisition-related items cash flows. Adjusted profit before tax reconciliation (£m) Like-for-like adjusted operating profit movement (£m) 11.6 313.8 302.2 46 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 47 | | 21/22 | Amortisation | 21/22 | | | --- | --- | --- | --- | --- | | | profit | of acquired | adjusted | | | | before tax | intangibles | profit | | | profit | | rates | before tax | profit | Strategic Report ### Financial review continued Summary balance sheet Return on capital employed (ROCE) Dividend 1 ROCE is the adjusted operating profit for the 12 months ended The Board intends to continue to pursue a progressive dividend 31 March 2022 31 March 2021 (restated ) 31 March 2022 expressed as a percentage of the monthly average policy while remaining committed to a healthy dividend cover over £m Assets Liabilities Net assets Assets Liabilities Net assets capital employed (net assets excluding net debt and retirement time by driving improved results and stronger cash flow. Intangible assets 473.3 – 473.3 466.4 – 466.4 benefit obligations). ROCE remained strong at 28.7%, up Property, plant and equipment 17 7. 3 – 17 7. 3 170.2 – 170.2 The Board proposes to increase the final dividend to 11.6p per 9.3 percentage points year on year (2020/21: 19.4%). Right-of-use assets 45.8 – 45.8 58.6 – 58.6 share. This will be paid on 22 July 2022 to shareholders on the Retirement benefit obligations register on 17 June 2022. As a result, the total proposed dividend Investment in joint venture 1.5 – 1.5 1.1 – 1.1 The Group has defined benefit pension schemes in the UK and for 2021/22 will be 18.0p per share, representing an increase of Other non-current assets and liabilities 7. 9 (70.1) (62.2) 12.8 (66.7) (53.9) Europe, with the UK scheme being by far the largest. All these 13% over the 2020/21 full-year dividend. Adjusted earnings Current assets and liabilities 1,137.1 (609.8) 527.3 936.9 (502.2) 434.7 schemes are closed to new entrants and in Germany and Ireland dividend cover for 2021/22 was 2.9 times. Capital employed 1,842.9 (679.9) 1,163.0 1,646.0 (568.9) 1, 07 7.1 the pension schemes are closed to accrual for future service. Retirement benefit net assets / (obligations) 0.3 (12.7) (12.4) 0.8 (56.5) (55.7) Foreign exchange risk Net cash / (debt) (including lease liabilities) 258.0 (300.1) (42.1) 199.0 (321.0) (122.0) Overall, the accounting deficit of the Group’s defined benefit The Group does not hedge translation exposure on the income schemes at 31 March 2022 was £12.4 million compared statements of overseas subsidiaries. Based on the mix of Assets / (liabilities) 2,101.2 (992.7) 1,108.5 1,845.8 (946.4) 899.4 to £57.4 million at 30 September 2021 and £55.7 million at non-sterling denominated revenue and adjusted operating profit, a 1. Restated for measurement period adjustments for prior year acquisitions (see Note 28 on page 175). 31 March 2021. one cent movement in the euro would impact annual adjusted profit before tax by £1.8 million and a one cent movement in the US dollar Working capital Net debt At 31 March 2022, the UK defined benefit scheme had an would impact annual adjusted profit before tax by £0.7 million. We have actively managed our working capital and, as a result, Our net debt is £42.1 million, £79.9 million lower than at accounting surplus of £24.9 million (2020/21: an accounting deficit working capital as a percentage of revenue decreased by 31 March 2021 when it was £122.0 million. Net debt comprised of £41.2 million). Under the scheme’s rules the Group does not have The Group is also exposed to foreign currency transactional risk 1 0.8 percentage points to 21.1% (2020/21 restated : 21.9%). gross borrowings of £300.1 million (2020/21: £321.0 million), an unconditional right to any surplus that may arise on the scheme because most operating companies have some level of payables in including lease liabilities of £48.7 million (2020/21: £61.5 million), and so the accounting surplus has been restricted to £nil. The currencies other than their functional currency. Some operating We continue to monitor receivables collection closely, which offset by cash and short-term deposits of £257.9 million (2020/21: movement from a deficit to a surplus was principally due to a companies also have receivables in currencies other than their remains our greatest short-term liquidity sensitivity. We have £197.9 million) and interest rate swap assets with a fair value of decrease in liabilities caused by a 0.7 percentage points increase in functional currency. Group Treasury maintains three to seven maintained the actions we took at the end of 2019/20 to limit our £0.1 million (2020/21: £1.1 million). the discount rate (from 2.1% to 2.8%) partially offset by an increase months hedging against freely tradable currencies to smooth the exposure by tightening credit policies, including short payment of 0.5 percentage points in inflation-linked assumptions, as well impact of fluctuations in currency. The Group’s largest exposures terms and low credit limits for new customers and seeking payment On 29 October 2021 we moved our £300 million three-year as an increase in the value of the assets. related to euros and US dollars. commitments for overdue balances before releasing new orders to revolving credit facility to a sustainability-linked loan (SLL). We will existing customers. Trade and other receivables at £594.3 million be measured against annual ESG actions relating to Scope 1 and 2 The triennial funding valuation of the UK scheme at 31 March 2019 1 (2020/21 restated : £493.6 million) are higher due to our CO 2 e emissions, packaging intensity and percentage of showed a deficit of £44.7 million on a statutory technical provisions increased revenue. management that are women. Meeting these annual ESG actions basis. A recovery plan was agreed with the trustee of the UK will mean a margin benefit of up to 2.5 basis points, while missing scheme with deficit contributions paid with the aim that the scheme Gross inventories increased to £559.2 million (2020/21: these ESG actions would mean we pay a margin premium of up to was fully funded on a technical provisions basis by March 2022. £460.4 million). We have added more inventory into our expanded 2.5 basis points, and if all three ESG actions were missed the loan These deficit contributions started in 2019/20 and consisted of an DC in Fort Worth, US, and have worked hard to add to our inventory would be declassified as an SLL but this would not be an event of annual contribution of at least £10 million, increased each 1 April by levels across the Group to protect supply given external supply default. This new agreement also replaced LIBOR with risk free the increase in the Retail Prices Index (RPI) for the year to the challenges, especially since they were lower than we would have rates and our request to take up the option to extend the maturity preceding December, plus an additional contribution of £25 million. liked at 31 March 2021 due to delays caused by Brexit and the for a year was later accepted. This additional contribution could be paid in instalments and paid as Suez Canal blockage. Strong experience and foresight by our and when we deemed appropriate, provided the total additional procurement teams meant that we were able to take steps to secure Our SLL of £300 million has a lender option accordion of up to a contr bution had been paid no later than 31 March 2022. Given our our inventory position as signs of industry supply shortages began further £100 million and a maturity of November 2024 which may financial strength, we paid £12.5 million in 2020/21 and the to develop. Our inventory turn was unchanged at 2.7 times as our be extended at the option of the Group for a further one-year term remaining £12.5 million in 2021/22. business grew in line with our increase in inventory. Inventory subject to individual lender approval. This SLL was undrawn at provisions have decreased by £10.9 million to £29.7 million mainly 31 March 2022 and, together with £151.7 million of private as a result of selling some heavily provisioned electronics products. placement loan notes, form our committed debt facilities of £451.7 million. Retirement benefit obligations Overall trade and other payables increased to £584.1 million (2020/21: £475.3 million) mainly due to the increase in purchases The Group’s financial metrics remain strong, with net debt to 31 March 2022 31 March 2021 of products. adjusted EBITDA of 0.1x and EBITA to interest of 44.6x, leaving £m UK Other Total UK Other Tot al significant headroom for the Group’s banking covenants of net debt Looking forward we continue to manage actively our working capital Fair value of scheme assets 585.7 7.6 593.3 572.8 8.1 580.9 to adjusted EBITDA less than 3.25 times and EBITA to interest position and remain focused on receivables collection. We continue greater than 3 times. Defined benefit obligations (560.8) (7.3) (56 8.1) (614.0) (7.3) (621.3) to invest in our inventory position to ensure that we remain well Effect of asset ceiling / onerous liability (24.9) – (24.9) – – – positioned to maintain service levels and deliver strong growth Status of funded schemes – 0.3 0.3 (41.2) 0.8 (40.4) within this supply constrained market. However, we understand that Unfunded schemes – (12.7) (12.7) – (15.3) (15.3) demand and supply dynamics can change quickly and that our Total net liabilities – (12.4) (12.4) (41.2) (14.5) (55.7) systems and orders need to remain flex ble to be able to adapt 160.5 according to market forces. We continue to pay our suppliers to (4 6) (2 0) (42.1) terms and have worked with some of our larger suppliers to improve terms where poss ble. 2.2 (122 0) Movement in net debt (£m) (76 2) | 20/21 | | 20/21 | Dividends Free | | Net new | Currency | 21/22 | | --- | --- | --- | --- | --- | --- | --- | --- | | net debt | Acquisitions | | | cash | leases and | movement | net debt | | | | | | flow | employee | | | shares 48 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 49 Strategic Report ### Risks, viability and going concern ## The Group has risk management and internal control ## Managing our processes to identify, assess and manage the risks which ## have the potential to affect the achievement of its ## strategic, operational and compliance objectives. ## risks effectively | The risk management process | This identification process also includes the | Ownership | | | --- | --- | --- | --- | | The Board has overall accountability for | Board and SMT specifically considering if | The Group’s principal risks are owned | 1. | | the Group’s risk management, which is | there are other less easily qualified and | by individual members of the SMT with | I dentify | | managed by the Senior Management Team | slowly developing risks (emerging risks) | respons bility for specific mitigation | potential risks | | (SMT) and co-ordinated by the Group’s | which the Group should be addressing. | actions / controls. The SMT collectively | | | risk team. The principal elements of the | | reviews the risk register, the controls and | | Assessment process are: mitigating actions at specific Group risk Management identifies the controls for review meetings. Identification each risk and assesses the impact and Risks are identified through a variety of l kelihood of the risk occurring (using The Board sources, both external, to ensure that consistent measures). These assessments The Board confirms it has undertaken a developing risk themes (emerging risks) consider the effects of the existing controls robust review of the Group’s principal and ### Our risk ## 4. 2. are considered, and internal, including (the resulting net or residual risk). emerging risks (including those that could ### management Monitor Assess the Board, senior, regional and country This assessment is compared with the threaten its business model, future ### and review process the risk management teams. The sharing of Group’s risk appetite to determine the performance, solvency or liquidity) and identified risks is two-way: both from appropriate risk treatment. This process assessed them against the Group’s risk Our risk appetite the local country teams to more senior is supplemented by an annual risk appetite. For several principal risks, In accordance with the UK Corporate management and from the Board to the and controls assessment completed members of the SMT will, as part of their Governance Code, the Board has defined broader management. The focus of the by operating locations and ongoing activities, update the Board on its risk appetite. Each risk listed within the risk identification is on those risks which, Group-wide functions. these risks and their mitigation. This allows risk register is categorised as either: if they occurred, and became issues, the Board to determine whether the actions strategic, operational, or regulatory / would have a material quantitative or being taken by management are sufficient. compliance. These three risk categories reputation impact on the Group and the ## 3. Determine and and their respective risk appetites are achievement of its strategic, operational treat the risk described in more detail below. and compliance objectives. ### Risk category Risk appetite Risk management objectives Risk appetite statement Strategic High The business will achieve its strategic objectives Eager to be innovative and to choose options ### Accountable and responsible teams by delivering supporting priorities. It will based on maximising opportunities and proactively manage the risks associated with potential higher benefit even if the activities See Strategic exploring more innovative product and service carry a higher residual risk. priorities on ### Board SMT Risk Committee Markets, regions and solutions and reinvesting in existing and new pages 28 to 31 initiatives to accelerate business growth. Overall accountability for the Group’s Responsible for owning and reviewing the ### Group functions approach to risk management and internal Group’s risk management process, risks Identifying, reviewing and communicating The business will adopt innovative solutions Willing to consider all options and choose the control including approving the Group’s and mitigating internal controls and Operational Medium local risks using risk registers where while identifying and managing the risks that one most likely to result in successful delivery risk appetite and the principal risks. making recommendations to the Board. applicable. could adversely impact its more operational while providing an acceptable level of benefit. See Business objectives to maintain the best customer and Seek to achieve a balance between a high model on pages supplier experience. likelihood of successful delivery and a high 26 and 27 ### Supporting teams degree of benefit. Regulatory / Low The business will ensure that it manages Preference for options that carry a low residual its regulatory and compliance risks risk with the potential for benefit / return not ### Audit Committee Group Risk Operational Audit compliance appropriately and: a key driver. Responsible for supporting the Board to Supports the business to identify, assess, Operational Audit, as part of its scheduled • complies with all its legal obligations across ensure effective internal controls and risk manage and report risks. This includes audits, reviews the effectiveness of the all its locations; and management systems and to measure the providing a consistent measurement Group’s mitigating controls for its risks. See Business • manages its own activities and those of Group’s effectiveness in managing risk. process for risks and helping identify risks model on pages other parties with whom it transacts to avoid that should be reported at a Group level. reputational damage to the business. 26 and 27 50 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 51 Strategic Report ### Risks, viability and going concern continued ## Principal risks and uncertainties Risks direction definition The risk is likely to increase within the next 12 months The risk is likely to remain stable within the next 12 months The Group has identified 11 principal risks, a net increase of one from those disclosed last year. This movement includes: The risk is likely to reduce within the • The removal of the risk associated with the UK’s exit from the EU with some of the specific effects now considered within the more next 12 months detailed risks such as the impact of possible future diverging legislation between the UK and the EU. • A new risk reflecting the increasing geopolitical uncertainties and how they may affect the business model and the Group’s profitability. • Including the climate change related risk as a principal risk (previously listed as an emerging risk), recognising our improving understanding of this area and its possible impact on the business. What is the risk and how could Risk direction and residual What are we doing What is the risk and how could Risk direction and residual What are we doing it affect our business? risk assessment to manage the risk? it affect our business? risk assessment to manage the risk? Strategic risk category – These risks are often caused by external developments. Mitigation is generally Operational risk category – These risks are related to those that could impact internal areas e.g. the business’s directed at a strategic level supported by local activities. infrastructure, ways of working and people. Mitigating actions are often processes and direct controls. | | | • Ensuring employees’ health, safety and | | | • Documented and tested business continuity | | --- | --- | --- | --- | --- | --- | | 1 | | | 5 | | | | | | wellbeing – keeping them safe to enable | | | plans at key distribution centres (DCs), sales | | Prolonged effects of the ongoing COVID-19 | The scale, duration and extent of the | | | Increasing risk, principally due to | | | | | a continuation of service. | Failure in the business’s critical infrastructure | | | and back-office locations. effects of the pandemic across different third-party suppliers being unable pandemic across different geographies • Supporting our customers by maintaining An unplanned event could disrupt the Group’s critical • To fulfil customer orders and maintain geographies of the world are better to meet all the increased demand This includes the uncertainties associated with the suitable levels of inventory and exploring infrastructure, including: service, we can plant switch whereby the understood and managed hence the during the economic recovery pandemic including changing customer demand, potential opportunities with suppliers by taking • Key location failure activity of a DC unable to operate can be risk will continue to reduce. following COVID-19. volatility in the recovery of receivables and associated appropriate actions to manage inventory • Core transaction systems unable to operate switched to another. liquidity risk, and delays and difficulties sourcing inventory supply and demand volatility. • Numerous third-party suppliers unable to meet demand Medium risk assessment owing to the Medium risk assessment due to the • Close relationships with third-party and associated cost volatility. This risk also includes the • Protecting our receivable balances and uncertainty about economic recovery potential impact of a significant failure recruitment agencies providing This could lead to the business being unable to serve uncertainty about the recovery phase: its speed, extent to their recoverability. effects and future pandemic variants of the Group’s critical infrastructure additional temporary staff if required in its customers. which confidence recovers from its effects and any other of the COVID-19 virus, albeit mitigated though given the nature of the event, a business failure. effects, such as supply constraints and inflation. Looking by improved international and a very low likelihood. • Ongoing assessments of critical further ahead there will be the risk associated with business preparedness. third-party inventory suppliers and further outbreaks. appropriate inventory levels to mitigate risk where needed. • Maintain strong relationships with customers 2 • Resilient IT systems infrastructure and suppliers to grow existing business and featuring operating redundancies and Fail to respond to strategic market shifts, Customer and competitor behaviours identify new opportunities. disaster recovery. for example, changes in customer will accelerate market developments. • Monitoring of market developments, • Core Group transaction systems managed demands / competitor activity and including the competitive environment. Medium risk assessment due to from a data centre. related stakeholder requirements • Targeted mergers and acquisitions (M&A) significant business impact of possible • Periodic testing of the IT disaster recovery Changes to customer and market assumptions upon which that complement both our existing business changes with mitigation by monitoring plans across the Group. the Group performance plans are based. and strategic growth areas. controls and change activities. • Strict control over upgrades to core transaction systems and other applications. • Improving the basics for customers with 3 prioritised proposals and projects, including • The Group continues to invest in both 6 The Group’s revenue and profit growth This risk will increase as we accelerate revenue growth and supporting activities expertise and technical solutions. Such the journey towards achieving our Cyber security breach / information loss Frequency and sophistication of cyber activities are not successfully implemented across shared business services and supply solutions include anti-malware software to strategic objectives. An attack on the Group’s systems, sites or data could lead attacks on businesses with This risk could lead to lower than forecast financial chain infrastructure. protect business PCs and laptops. External to potential loss of confidential information and / or well-publicised malicious cyber activity performance in terms of revenue growth, cost savings • Integrated project management governance emails identified to all business recipients. Medium risk assessment owing to disruptions to the Group’s transactions with customers aimed at individuals and companies and operating profit with changes required to Group plans structure with accountabilities designed to Firewalls to protect against malicious the controls we have to manage (including the transactional website) and transactions with expected to continue to increase. and any post-acquisition integration activities. support delivery on time and to cost, within attempts to penetrate the business strategy implementation. suppliers. Accidental data loss could also occur because resources and capabilities. High risk assessment due to increased IT environment. of employee or partner action (or inaction). • Specific and tailored post-acquisition use of and sophistication of cyber • Computer emergency readiness team integration plans overseen by a attacks across industries. (CERT) to track software vulnerabilities specialist team within our Integration and respond to security incidents. Management Office. • Our Technology teams have procedures to update supplier security patches to servers • Continuously monitor the existing markets and clients. They regularly undertake control 4 in which the Group operates to identify reviews to consider the security implications Effects on the business due to geopolitical Increasing global geopolitical of IT changes. potential uncertainties that may impact developments uncertainty means that this risk • With ongoing higher levels of homeworking, our service to customers within countries, Future global destabilisation with impacts on international will increase. increased cyber monitoring, employee regions or globally. business activities such as increasing operating costs, • Through our supplier (direct and indirect) training and messaging on cyber Medium risk assessment due to the additional trade sanctions and supply chain delays. relationships, identify potential supply risk awareness. potentially high impact though this is vulnerabilities and ensure appropriate • Security reviews with selected likely to be regionally based which resilience is in place. third-party suppliers. can be better absorbed by the Group. • Considered as part of the due diligence process when looking at potential M&A targets. 52 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 53 Strategic Report ### Risks, viability and going concern continued ## Principal risks and uncertainties continued Risks direction definition The risk is likely to increase within the next 12 months The risk is likely to remain stable within the next 12 months The risk is likely to reduce within the next 12 months What is the risk and how could Risk direction and residual What are we doing What is the risk and how could Risk direction and residual What are we doing it affect our business? risk assessment to manage the risk? it affect our business? risk assessment to manage the risk? Operational risk category continued Operational risk category continued | | | • Maintain a strong working relationship | | | • Undertaken detailed climate scenario | | --- | --- | --- | --- | --- | --- | | 7 | | | 10 | | | | | | with pension trustees where Company | | | analysis of physical and transition risk | | UK defined benefit pension scheme cash | Reducing risk due to the improvement in | | Potential impact on the business due | Increasing risk due to the evidence | | | | | representatives regularly attend trustee | | | impacts on the Group. See pages 78 and 79. | | | the scheme funding position due to | | | supporting climate change and its | | | requirements are more than the cash available | | meetings to update on business | to climate change effects | | • Strategies and controls in place to mitigate | | | deficit contributions to the UK pension | | | global impact (both physical and | | | The Company may be required to contribute increased cash | | performance and risk management. | The Group could be unprepared for the various | | physical climate-related risks on operations | | | scheme (as per the recovery plan | | | transition risks). | | | sums to the UK defined benefit pensions scheme due to the | | • Quarterly reviews of the pension scheme | consequences of climate change. This could be either: | | and wider supply chain. See pages 60 to 65 | agreed with the pension trustee), asset trustee exercising its power to close the scheme if in a funding position. • The physical risks of more extreme weather conditions and 77. Following a detailed quantitative and performance and changes in deficit (the trustee has confirmed that it has no current • Joint trustee / Company working group (heat / flooding) affecting supply chain channels and • Net zero plan and science-based targets to qualitative review of our physical and market-related assumptions. intention to exercise this power to wind up the scheme). to review investment performance and disrupting customer service. decarbonise our DCs, transport network and transition risks, we assess this risk as | | strategy quarterly. | • The transition risks associated with the consequences of | | products, as part of our 2030 ESG action | | --- | --- | --- | --- | --- | | Medium to low risk assessment due | | | medium to low given the likely impact | | | | • Company and trustee have a funding | the migration to a carbon neutral economy, including the | | plan – For a Better World. See page 61. | | to a de-risked cash flow driven | | | and timescales for these risks on | | | | agreement to eliminate the deficit over time. | impact on the transport of inventory both within the Group | | • Increasing sustainable products, packaging | | investment strategy. | | | the Group. | | | | • Company covenant and ability to support the | and to customers. | | and transport options to support our | | | scheme regularly reviewed by trustee. | | | customers’ climate goals. See pages 63 | to 65. • Development of existing employee • Including a review of climate risks and 8 competencies and the introduction of opportunities as part of M&A due diligence. People resources unable to support the No expected significant changes to external expertise where appropriate. the supply and retention of existing and future growth of the business • Continuous employee performance Regulatory / compliance risk category – External regulations and requirements can be very localised. Risk quality employees. The business may not be able to attract and retain the conversations to align personal objectives mitigations are often specific actions to ensure compliance. necessary high-performing employees to ensure that the with the Group’s strategy. High risk assessment due to wider business achieves its targeted performance. • COVID-19 people-related support activities market challenges attracting and retaining high calibre employees in an across the regions where still needed. • Target Zero, including accident reporting 11 increasingly competitive environment. • Regular employee talent reviews and and reduction strategies which are Fail to comply with international and local No significant changes to the risk. succession planning for the business’s more supported by central, regional health and senior / critical roles. legal / regulatory requirements safety expertise supported by in market Medium risk assessment: controls • Developing the business brand to attract Failure to manage these risks could lead to: health and safety representatives. operating across various activities, high potential talent. • Serious health and safety incidents / breaches. • Employment of internal specialist expertise, including transactional, health and • Developing a more high-performance, • Non-compliance with trade, transport or product supported, where needed, by suitably safety and legal, to monitor risks and purpose-led employee culture. regulations. qualified / experienced external partners, for apply controls. • Breaches of any other regulatory or legislative example to provide relevant country specific • Strong cash generative business. requirements within the markets / regions in which the data protection regulation guidance. 9 • Strong balance sheet. Group operates. • Ongoing reviews of relevant national and Impact on the business if the macroeconomic Increasing risk due to labour shortages, • Significant headroom maintained on debt international compliance requirements. raw material and energy costs fuelling environment deteriorates covenants and banking facilities. • Training and awareness programmes inflation pressures and a downward The Group’s revenue, and hence profit, could be adversely • Relevant foreign exchange cash flow focusing on anti-bribery, competition and revision of global GDP forecasts. affected by a decline in the global macroeconomic hedging for business trading purposes. data protection legislation with increased environment with other associated effects such as • Cost management and control of inventory. modern slavery awareness. Medium risk assessment reflecting the foreign exchange volatility. • Frequent business financial performance • Code of conduct for all employees. business being less cyclical coupled reviews covering cash flow and profitability • Ethical sourcing policy for suppliers. with a strong balance sheet and its cash including revenue, gross margin and • Our trade compliance systems which scan generative nature. operating costs. This includes more external customer orders to ensure relevant significant costs such as freight. trade compliance requirements are being followed, including sanctions, embargoes and denied parties. • Working with our suppliers to obtain relevant product information, for example any restrictions on use. 54 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 55 Strategic Report ### Risks, viability and going concern continued Viability statement The Board also considers the long-term Viability assessment period Scenario and related stress tests modelled Link to principal risk and uncertainties Assessment of prospects prospects of the Group as part of its regular In its assessment of the Group’s viability, The Group’s strategic priorities are focused monitoring and review of risk management the Board has reviewed the assessment Scenario 1 – Revenue and gross margin down and on delivering sustainable growth and and internal control system, as descr bed on period and has determined that a three-year 1 Prolonged effects of the ongoing COVID-19 pandemic across different operating costs up superior returns for all our stakeholders and page 98. period to 31 March 2025 continues to be geographies Revenue falls in 2022/23 by more than that seen in the first half of 2020/21 include a number of initiatives. They are most appropriate. The robustness of the The detailed rolling 18-month forecast is (when the biggest impact of COVID-19 was seen) with a further decline in 2 Fail to respond to strategic market shifts e.g. changes in customer | discussed in more detail on pages 28 to 31. | | strategic plan is significantly higher in the | 2023/24. Gross margin declines in 2022/23 by 2 percentage points and | | | | --- | --- | --- | --- | --- | --- | | | supplemented by updates during the month | | | | demands / competitor activity and related stakeholder requirements | | | | first three years with the final two years | freight, variable labour and other operating costs prices continue to rise. | | | | Our business model, as described on pages | of our cash position and latest cash | | | | | | | | | | 3 | The Group’s revenue and profit growth activities are not successfully | | | | being a high-level extrapolation. The Group | No mitigation taken on costs in 2022/23 and then costs move in line with | | | | 26 and 27, is structured so that the Group is | forecasts in order to track closely our net | | | | implemented | | | | has few contracts with either customers or | revenue in future years. | | | | a global omni-channel provider of product | debt position and enable us to take any | | | | | | | | suppliers extending beyond three years | | 4 | Effects on the business due to geopolitical developments | | and service solutions for designers, builders | necessary actions on a timely basis. Our | | | | | and, in the main, contracts are for one year capital position is supported by regular 9 Impact on the business if the macroeconomic environment deteriorates and maintainers of industrial equipment and or less. The business operates with a operations to a very broad spread of reviews of the Group’s funding facilities 10 Potential impact on the business due to climate change effects minimal forward order book, generally | customers both in terms of industry sector | and banking covenants’ headroom, through | | | | | --- | --- | --- | --- | --- | | | | taking orders and shipping them on the | 11 | Fail to comply with international and local legal / regulatory | | and geography. The Group is not reliant on | the Board’s Treasury Committee. During | | | | | | | same day. In addition, as more business | | requirements | | one particular group of customers or | the year we moved our £300 million | | | | continues to move online and we become | suppliers, with its largest customer | three-year revolving credit facility to a | | | | | | --- | --- | --- | --- | --- | --- | | | | more agile, speed of change increases and | Scenario 2 – Cash collection down | | | | accounting for under one percent of | sustainability-linked loan and took up the | | | 1 | Prolonged effects of the ongoing COVID-19 pandemic across different | | | | so visibility is relatively short term. Of the | Cash collection from trade receivables deteriorates leading to trade | | | | revenue and its largest supplier less than | option to extend the maturity for a year. It | | | | geographies | | | | Group’s long-term obligations, the UK | receivables impaired by 5% of revenue in 2022/23. | | | | four percent of revenue. Our business | has a lender option accordion of up to a | | | | | | | | pension scheme is the largest and its | | 4 | Effects on the business due to geopolitical developments | | model is differentiated by: our global | further £100 million and the maturity may be | | | | | triennial funding valuation forms the basis extended at the option of the Group for up 10 Impact on the business if the macroeconomic environment deteriorates network of 14 distribution centres; our of our agreeing its funding with its trustee. | talented and customer-centric team; our | to one further one-year term subject to | | | | | | --- | --- | --- | --- | --- | --- | | | | Our share-based payment schemes are | Scenario 3 – Significant infrastructure failure | | | | strong supplier relationships; our broad | individual lender approval. This loan was | | | | | | | | | | 5 | Failure in the business’s critical infrastructure | | | | also mainly for three years. | Major incident at the largest DC which destroys the building and | | | | range of products and value-added | undrawn at 31 March 2022. | | | | | | | | | its contents. | 10 | Potential impact on the business due to climate change effects | | solutions capabilities; and our strong digital | | Assessment of viability | | | | As described throughout this Annual Report | presence. The Group has high inventory | | Each of the Group’s principal risks and | | | | | --- | --- | --- | --- | --- | --- | | | and Accounts, the Group’s performance | | Scenario 4 – Major cyber breach / information loss | | | | availability with products sourced from a | | uncertainties on pages 52 to 55 has a | | 5 | Failure in the business’s critical infrastructure | | | over the past year has been very strong | | Major system failure (possibly caused by a cyber attack) leading to | | | | large number of suppliers and provides | | potential impact on the Group’s viability and | | | | | | with like-for-l ke revenue growing by 26% | | a serious loss of service, fines for data breach and loss of reputation | 6 | Cyber security breach / information loss | | customers with a reliable and fast service. | | so the Board considered various scenarios | leading to halving of revenue growth. | | | and free cash flow of £160.5 million and examined a number of factors that The Group’s results and financial position reducing net debt to £42.1 million (including could impact each in the future. It decided are reviewed monthly by both our SMT and lease liabilities of £48.7 million) at 31 March which scenarios would have the most the Board. Every day the SMT receives an 2022 from £122.0 million (including lease impact on the viability of the Group analysis of the previous day’s revenue and liabilities of £61.5 million) at 31 March 2021. The scenarios considered and the severe declines in gross margin and a major Confirmation of viability and determined an appropriately severe gross margin. The Board receives and We also paid dividends during the year of and plausible stress tests for the principal deterioration in cash collection and would Based on the assessment outlined above, but plausible stress test for each of reviews monthly management accounts, £76.2 million (2020/21: £71.2 million). We 7 risks and uncertainties ‘UK defined have to result in adjusted operating profit the Board has a reasonable expectation these scenarios. | including cash flows, and also receives | have ended the year with an even stronger | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | benefit pension scheme cash requirements | | margin falling to under 2% in at least one of | that the Group will be able to continue in | | regular performance and forecast updates | balance sheet than with which we started. | The strategic plan approved at the March | | 8 | | | | | | | are more than the cash available’ and | | the following three years. These reverse | operation and meet its liabilities as they fall | | from the CFO and Chief Executive Officer. | | 2022 Board meeting is currently considered | ‘People resources unable to support the | | stress tests also assumed that no major | due over the three years to 31 March 2025. | Details of our sources of finance are to reflect the Board’s best estimate of the existing and future growth of the business’ reorganisations or significant working We frequently update our detailed rolling outlined in Note 23 on page 171, with Going concern future prospects of the Group. Therefore, were assessed to have less impact on the capital initiatives occur in mitigation, capital 18-month forecast of the Group’s income the earliest facility maturing being the The going concern period is defined as in order to assess the viability of the Group, Group’s viability. expenditure is unchanged from that in the statement, balance sheet and cash flows sustainability-linked loan in November 2024. a period of at least 12 months from | | | the scenarios and stress tests were | | strategic plan, dividends continue to be paid | | | --- | --- | --- | --- | --- | --- | | which are regularly reviewed, and the | | | In performing the above tests it was | | | | | The Group’s debt covenants are EBITA to | | | | 24 May 2022. | | | | modelled by overlaying them onto the | | and there are no changes in debt financing. | | | assumptions approved, by the Board. | | | assumed that no major reorganisations or | | | | | interest to be greater than 3:1 and net debt | strategic plan to quantify the potential | | | | | | | | | The Board considers the risk of these | Based on the assessment outline above, | significant working capital initiatives occur The Group’s long-term prospects are to adjusted EBITDA to be less than 3.25:1. impact of one or more of them crystallising circumstances occurring to be remote. the Board also believes that it is appropriate in mitigation, capital expenditure is assessed primarily through our strategic At 31 March 2022 EBITA to interest was over the assessment period. to continue to adopt the going concern unchanged from that in the strategic plan, The above scenarios are hypothetical and and financial planning process. This 44.6x (2020/21: 26.7x) and net debt to basis in preparing the Group’s accounts. | | | The scenarios and related stress tests | dividends continue to be paid and there | extremely severe for the purpose of creating | | --- | --- | --- | --- | --- | | includes the preparation of a five-year | adjusted EBITDA was 0.1x (2020/21: 0.5x) | | | | | | | modelled and how they link to the principal | are no changes in debt financing. | outcomes that have the ability to threaten | | strategic plan and an annual target setting | (see Note 3 on page 149 for reconciliations) | | | | | | | risks and uncertainties were: | | the viability of the Group; however, multiple | | process involving both Group and regional | and under our strategic plan these are also | | | | The results of the above stress tests control measures are in place to prevent management which are updated annually comfortably met. showed the Group would be able and mitigate any such occurrences from and reviewed and approved by the Board. to withstand the impact of these taking place. If any of these scenarios The SMT receives and reviews a scorecard scenarios occurring. actually happened, various options are each quarter showing progress against the Reverse stress tests were also undertaken available to the Group to maintain liquidity strategic plan objectives. The Board also to assess the circumstances that would so as to continue in operation. receives updates and, if appropriate, the threaten the Group’s current financing strategic plan is updated depending on arrangements. These included significant progress and performance. declines in like-for-like revenue, significant 56 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 57 Strategic Report ### Environmental, social and governance (ESG) How we developed our 2030 ESG action plan Our purpose, making amazing happen for a better world, ## Alignment to ratings and standards reflects our focus on delivering results for people, planet and profit. To reinforce this commitment, we launched our 2030 ESG action plan – For a Better World in November 2021. For a Better World builds on our former 2025 ESG targets with four global goals and 15 supporting actions. With insights gathered from our materiality assessment, the plan CDP: EcoVadis: FTSE4Good Index: complements our Group strategy, The RS Way, by delivering ## Our purpose and new 2030 A- climate Gold medal 3.2/5 score 2021 long-term value for all our stakeholders and accelerating our leadership score 2021 ## For a Better ESG action plan will generate Journey to Greatness. 2021 Our refreshed approach supports six of the UN SDGs and ## greater long-term value for our lays the foundation for our long-term vision to 2050. Our key commitments and 2021/22 performance highlights can be ## stakeholders and triple bottom ## World: found in the table below. ## line benefits for people, planet ## and profit. ## our 2030 ESG MSCI: Sustainalytics: A rating 2021 Global top 50 ESG companies – 18/14,661; Negligible risk (6) ## action plan See our progress against 15 supporting actions on pages 60, 66, 69 and 74 ### Global goals Key action areas Performance highlights | | | We are developing | Net zero emissions in direct | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2030 ESG | | | | 50% | | 88% | | 17% | | | | | sustainable operations | operations by 2030, value | | | | | | | | | | | | reduction in Scope 1 | | of Group electricity from | | reduction in Scope 3 | | | | | and product and service | chain before 2050. SBTi, UN | | | | | | | | | | | | and 2 emissions | | renewable sources in | | transport emissions | | | action plan | Advancing | solutions | Global Compact’s Business | | 1 | | 2 | | 3 | | | | | | since 2019/20 | | 2021/22 | | intensity since 2020/21 | | ### Ambition for 1.5°C and UN ## Sustainability ### Race to Zero commitments | | We are building skills and | Building skills and fostering | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | | 1.2m | £218k | | c. 4,200 | | | fostering innovative | innovation with 1.5 million | | | | | | | | | members, students and | raised to support | | universities, colleges | | | solutions that improve lives | engineers and innovators | | | | | | | | | start-ups engaged | The Washing Machine | | and schools use our | | Championing | | | | | 4 | | | | | | through DesignSpark | Project to improve lives | | educational products in | their teaching ## education and ## innovation | | We are creating a safe, | Working towards 40% | | | | | --- | --- | --- | --- | --- | --- | | | | | 75 | 44% | 23% | | | inclusive and dynamic | women and 25% ethnically | | | | | | | | employee engagement | of the Board are women, | reduction in our all | | | culture where our people | diverse leaders | | | | | | | | score in 2021/22 – our | including the Chair | accident frequency rate | | Empowering | can thrive and grow | | | | | | | | | highest to date | | since 2019/20 | ## our people ### Supporting six United Nations ### Sustainable Development ### Goals (UN SDGs) | | We ensure the highest | Increasing screening and | | | | | --- | --- | --- | --- | --- | --- | | | | | ESG | £300m | 112 | | | ethical standards | ESG objectives for | | | | | | | | metric added to annual | sustainability-linked | RS PRO supplier ESG | | | throughout our business | suppliers. ESG metrics in | | | | | | | | incentive for 2022/23 to | loan (SLL) to help | inspections since May | | Doing business | and global value chain | employee rewards and | | | | | | | | drive progress against | facilitate ESG action | 2019 | | | | sustainability-linked loans | our 2030 climate actions | | | ## responsibly 1. Scope 1 and 2 CO 2 e emissions updated to reflect changes in reporting and emissions factors. 2. Percentage of total electricity use. 3. Tonnes of CO 2 e due to Scope 3 transport emissions per tonne of product sold. 4. This includes a corporate donation of £97,000 made in April 2022. 58 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 59 Strategic Report ### Environmental, social and governance (ESG) continued ## Our net zero ### Supporting UN SDGs ## roadmap In November 2021, we announced our Our pathway to net zero in our direct operations ambition to become a net zero business by 2030. This included setting science-based targets covering our Scope 1, 2 and 3 ## Advancing 1 2 emissions with a 75% reduction in direct Our journey to 2019/20 Our performance and trajectory to 2029/30 emissions by 2030. We have also set 20 supporting targets for packaging, waste and ## sustainability transportation to drive further environmental Actual performance performance and climate action. 1 to 19/20 Beyond our own business we are committed to supporting our customers and suppliers ### Our approach Our commitments and progress 15 on their journey to tackling climate change e emissions 2 ### We sit at the centre of the and achieving net zero by 2050. This 2030 actions Performance Trajectory for 1.5°c includes offering an increasing range of ### global industrial value chain 40% reduction sustainable product and service solutions to By 2030 in our direct operations: 14/15 – 19/20 ### as a critical partner to our ## • Carbon: Be net zero with a science-based 50% our customers, as well as committing to ### customers and suppliers. target to reduce absolute emissions from our engage 65% of our suppliers by spend to 10 reduction in Scope 1 and 2 1 own operations by 75% set SBTs by 2025. ### Thus, we play an important 2 emissions since 2019/20 | | • Packaging: Make our packaging more | | | Min 75% reduction | | --- | --- | --- | --- | --- | | role in advancing | | 1 | To drive collaboration and industry-wide | | | | sustainable: reduce intensity by 30% | , | | 19/20 – 29/30 | | | with 100% of packaging widely reusable, | | action, we joined the UN Global Compact’s | | ### environmental sustainability ## 16% recyclable or compostable, and made with Business Ambition for 1.5°C and the ### and tackling climate change 50% recycled content reduction in packaging 5 UN Race to Zero in 2021/22 to align to Actual performance | across many sectors of | • Waste: Reduce, reuse and recycle our waste: | | | 3 | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | intensity since 2019/20 | | best-practice guidelines and collaborate | | | 2 | | | | | 1 | | | | | 19/20 – 21/22 | | | | | reduce intensity by 50% | , recycle > 95% | | | | | | | | | the global economy. | | | | | to drive positive change. | | | | Net zero | | | and achieve zero waste to landfill in our | | | | | ‘000 tonnes of Scope 1 and 2 CO | | | | trajectory ## direct operations 73% ### We are committed to the of total waste recycled. Offsets to net zero ### Science Based Targets Declined by one percentage 14/15 19/20 24/25 29/30 ### initiative (SBTi) and to point in 2021/22 ### achieving net zero in our Working towards a net zero global 1. Group performance excluding businesses acquired post 2019/20 baseline year. ## operations by 2030. We are 17% 2. Performance and plan re-based to 2019/20 to include acquired businesses. value chain by 2050: We submitted our science-based ### also helping customers and • Transport: Reduce Scope 3 transport reduction in intensity targets covering Scope 1, 2 and 3 1 emissions by 25% per tonne of product sold of Scope 3 transport emissions emissions to the SBTi for verification ### suppliers meet their climate • Products and solutions: Develop innovative 4 | | | since 2019/20 | in May 2022. We expect to obtain | | --- | --- | --- | --- | | ambitions in line with our | and sustainable product and service solutions | | | | | for all our customers | | formal approval of our ambitions | ### commitment to delivering a • Supplier carbon: Engage 65% of suppliers in 2022/23. ## 19% ### net zero value chain by spend to set SBTs by 2025 of suppliers by spend ### by 2050. are committed to setting an SBT by 2025 Our journey to net zero 1. By 2029/30 from 2019/20. 2. Scope 1 and 2 emissions updated to reflect changes in reporting and emissions factors. Our journey so far By 2030: Net zero in our Before 2050: Net zero across 3. Tonnes per £m revenue. | 4. Tonnes of CO | 2 e due to scope 3 transport emissions per tonne of product sold. | | direct operations | our wider value chain | | --- | --- | --- | --- | --- | | | | • 50% reduction in Scope 1 and 2 | • SBT to cut absolute emissions by 75% | • 65% of our suppliers by spend to set | | | | emissions since 2019/20 | by 2029/30, from 2019/20 | science-based targets by 2025 | | | | • 88% of Group electricity usage from | • 100% renewable electricity across | • 25% reduction in Scope 3 transport | | | | renewable sources in 2021/22 | the Group | emissions, per tonne of product sold by | | | | • Solar panels added to German DC: | • Increase onsite renewable electricity | 2029/30, from 2019/20 | | | | 750kW capacity | generation | • Expand sustainable product and service | | | | • Energy efficiency improvements to DCs | • Low-carbon DCs delivered through | solutions for our customers | | | | and sites | low-carbon technology and efficiency | • Utilise wider societal and technological | | | | • All new UK company cars are electric or | projects | developments in increased availability of | | | | hybrid from 2021/22 | • Net zero emissions company car | low-carbon energy, heating and cooling | | | | | and van fleet | technology, global logistics solutions, | | | | | • Gold standard offset project strategy | carbon capture and storage | for residual emissions Our upgraded distr bution centre (DC) in Bad Hersfeld, Germany, is powered in part by a 6,000m² solar array which generates 750kW of green photovoltaic (PV) electricity and 22% of the site’s annual electricity requirement. The expanded site can now house up to 500,000 products, which will significantly reduce delivery distances and associated transport emissions. 60 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 61 Strategic Report ### Environmental, social and governance (ESG) continued ## Greenhouse Closing the ## gas (GHG) emissions loop on waste | | | Packaging | Recycling and waste | Water | | --- | --- | --- | --- | --- | | GHG emissions and Streamlined Energy and Carbon Reporting (SECR) disclosure | | Packaging is key to ensuring our products | We are committed to achieving circularity | As an industrial product and service | | In accordance with the Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 and the Companies | | are delivered safely, securely and without | within our own operations. Our 2030 goal is | solutions provider, RS Group does not have | | (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018, our 2021/22 Group | | damage. Our 2030 packaging actions are to | to reduce waste intensity by 50% from | manufacturing facilities. Thus, water use is | | emissions were: | | achieve a 30% reduction in packaging | 2019/20. We also want to reuse, reduce and | generally limited to hygiene, cleaning and | | | Metric 2021/22 2020/21 | intensity; for 100% of our packaging to be | recycle over 95% of our waste and we are | catering use across our sites. | | | | widely reusable, recyclable or compostable; | targeting zero waste to landfill in our direct | | Group Scope 1 emissions In 2021/22, as our people returned to our 1 and for our packaging to have at least 50% operations by 2030. Combustion of fossil fuels tonnes CO 2 e 4,555 4,219 sites following the COVID-19 pandemic, | | | 2 | | recycled content. | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Operation of facilities, including fugitive emissions | | tonnes CO | 2 e 153 254 | | | In 2021/22, waste intensity was down by 1% | total water use increased by 10%. This was | | Group Scope 2 emissions | | | | In 2021/22, packaging intensity was down | | year on year and by 12% since 2019/20. | due to enhanced hygiene and cleaning | | | 3 | | | | 7 | | | | Purchased electricity (market-based) | tonnes CO | | 2 e 1,446 3,286 | by 13% to 2.11 | tonnes per £m revenue | The proportion of total waste that is | across our facilities. Despite this, total water | 3 versus 2020/21 and by 16% against the recycled declined by one percentage point use per head decreased by 4% to 4.06m Intensity metric | | | | | | | 2019/20 baseline. This was primarily due to | to 73% and by six percentage points from | per head in 2021/22. The cumulative | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | CO | 2 e due to premises energy and vehicle use per £m revenue tonnes CO | | | | 2 e /£m 2.3 3.9 | | | | | | | | 2 | | | the continued use of reusable eco-totes and | the baseline year. This decline was due to | reduction since 2019/20 is 29%. | | Total CO | | 2 e per £m revenue | | tonnes CO | 2 e /£m 2.4 4.0 | | | | | | | | | | | pallets for product movements between our | operational changes by waste contractors | | 4 SECR disclosures | | | sites in Europe. We also increased the | during and following the COVID-19 | | | | --- | --- | --- | --- | --- | --- | | UK total Scope 1 and 2 emissions (market-based) tonnes CO | 2 e 3,060 2,987 | | | In 2021/22, the Group commissioned | | | | | proportion of packaging by weight which is | pandemic. Waste that is not recycled is | | | | UK energy consumption (including vehicles) GWh 30.7 28.8 | | | | independent external assurance for its | | | | | recyclable to 92%, up from 89% in 2020/21. | typically sent for incineration or energy | | | | | | | | Scope 1 and 2 CO | 2 e emissions, carbon | recovery. In 2021/22, 8% of our total waste 1. Includes emissions of 1,615 tonnes relating to fuel use in company vehicles (2020/21: 809 tonnes). Currently, 42% of our packaging is made with intensity and packaging intensity with 2. 153 tonnes of CO 2 e due to fugitive emissions from air-conditioning systems (2020/21: 254 tonnes). was sent to landfill. ERM CVS. The independent assurance 50% recycled content, so we have a way to 3. Market-based electricity purchased from renewable sources at zero CO 2 e per kWh. Location-based emissions increased by 6,215 tonnes at grid-average rates (2020/21: report is set out on pages 80 and 81. go to reach our target of 100% by 2030. We Moving forward, we will continue to work 4,441 tonnes). 4. SECR: UK emissions were 50% of 2021/22 global market-based emissions and including vehicles UK energy use was 57% of global energy use. are working with our suppliers to increase with waste contractors to deliver our targets, the amount of recycled content in our reduce intensity and to recycle and reuse GHG emissions are calculated using the UK Department for Environment, Food & Rural Affairs and International Energy Agency packaging and rolling out recyclable paper materials where possible to avoid landfill. emissions factors in line with the GHG Protocol (Corporate Standard). Data is updated to reflect reporting methodology changes and padded envelopes further across Europe. current emission factors. Full data can be found in our ESG data centre on our website: rsgroup.com/esg 5,400 3,490 ## A greener | | 4 810 | 4 740 | 4 710 | 2 980 | 2 980 | | | 40 900 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 2 930 | | | 39 200 | | 4 090 | | | | | | | 2 700 | | | 7.71 | | distribution model | | | | | | | | | | | | | | | | | | 31,800 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | 2.62 | | | | 1 64 | 1.63 | | | | | | | 29 000 | | | | | | | | | | 2.52 | 2.43 | | | | 1.56 | | | | 6.16 | | | | | | | | | | 2.25 | | | | | | | | 1.39 | | | | 5.75 | | | | | | | | | | | | | 2.11 | | | | | 1.37 | | | | | | | | | | | | | | | | | | | | | | | | | 4.24 | 4.06 | | Scope 1 and 2 emissions | | Fleet emissions | | | | | | | | | | | | | | | | | | | Since 2014/15, we have delivered a 70% | | We have made significant progress in reducing | | | | | | | | | | | | | | | | | | | | | | 12 400 | | | | | | 21/2220/2119/2018/1917/18 | | | | | 21/2220/2119/2018/1917/18 | | | | | 21/2220/2119/2018/19 | | reduction in Scope 1 and 2 emissions from | | fleet emissions and in transitioning to more | | 11 900 | | | | | | | | | | | | | | | | | | | | | | Packaging (tonnes) | | | | | Total waste (tonnes) | | | | | Water use (m | | 3 ) | | | 7.4 | our DCs and other premises energy use, | sustainable vehicles over the last two years. | 6.8 | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 6.3 | | | Packaging intensity (tonnes / £m revenue) | Waste intensity (tonnes / £m revenue) | Water use per head (m | 3 / head) | | including the use of company-owned and | | | | 7 500 | | | | | | | | In 2021/22, emissions were 67g/km across | | | | 6,000 | | | | | leased vehicles. For the launch of our net 3.9 our RS UK fleet, a reduction of 38g/km per zero ambitions we have set the baseline of vehicle from 2019/20. In addition, 94% of 2.3 2019/20 and have updated our current and all new vehicle purchases in the UK were historic reporting accordingly. 21/2220/2119/2018/19 electric or hybrid vehicles, which now make | | | | CO | 2 e (tonnes) | | | --- | --- | --- | --- | --- | --- | | In 2021/22, we reduced our Scope 1 and 2 | | up 42% of our RS UK fleet. | CO | e intensity (tonnes CO | e / £m revenue) | | CO | 2 e emissions by 50% against our | | | | | During 2022/23, we will be rolling out our 2019/20 baseline and by 20% year on year. sustainable fleet framework beyond the UK, Indexed to revenue, our emissions intensity increasing the purchase of fully electric 47 500 47,400 is down by 63% against the baseline year 45 900 45 400 vehicles (EVs), conducting electric van and 41% since 2020/21. During the year, trials and increasing our electric vehicle 26.1 25.0 88% of our electricity was from renewable 24.1 24 5 charging infrastructure. | sources, including our own onsite energy | | 18.6 | | --- | --- | --- | | generated by solar panels on the roof of our | In 2022/23, we will also be introducing a | | | expanded DC in Germany. This is a 78 | new salary sacrifice benefit called Ignite for | | | percentage points increase in the use of | our UK employees. The scheme will make it | | 21/2220/2119/2018/19 renewable electricity since 2019/20. easier and more affordable for our people to Promoting a circular Donating inventory Premises' energy (MWh) purchase or lease their own electric vehicle. Energy intensity (MWh / £m revenue) During the year, 25 sites covering 47% of ## supply chain In 2021/22, we launched an exciting initiative targeting two of our operations by revenue and 62% by 1. KPIs are on a constant exchange rates basis and are updated to reflect changes in reporting methodology and/or our core ESG ambitions: reducing waste and improving lives floor area were covered by ISO 14001 emissions factors. To help increase the reuse of packaging in our supply chain, through innovation. certifications. Excluding the third-party 2. Covers the operations under our financial control globally but excludes several smaller sites where energy, waste and water costs and consumption are included in lease costs. we are replacing wooden and cardboard packaging pallets managed DC in Hong Kong, our 13 owned The initiative, Save Our Stock (SOS), notifies our educational 3. As a result of the COVID-19 pandemic, or for other reasons, some reports include estimated data where suppliers with reusable, returnable eco-totes for product movements and leased DC sites, with total floor area customers and charities of any surplus items that they can have not been able to provide their usual reports. 2 between our European sites. of 264,000m , have environmental 4. This data aligns to the statutory information required by the Companies Act 2006 (Strategic Report and Directors’ receive for free by signing up to a regular newsletter. Report) Regulations 2013 and the Companies (Directors’ Report) and Limited Liability Partnerships (Energy and | | management systems in place with four | | | | | | | | Eco-totes have a longer life than wooden pallets which need | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | Carbon Report) Regulations 2018. | | | | | In April 2022, we delivered a large number of surplus fan | | | covered by ISO 14001. The majority of | | 1,2,3,4,5,7,8 | 5. CO | | equivalent from vehicles and all premises Scope 1 energy sources with market-based Scope 2 emissions | | | to be repaired more frequently. When rolled out in 2022/23, | | | | 1,2,3,6 1,2,3 | 1,2,3,7 | 1,2,3,4 | | | 2 | | | | heater units to the Salvation Army to help keep vulnerable | | Scope 1 & 2 emissions Total waste Packaging use Water use Premises’ energy use | | | | | | | | | | | | | our 46 other sites, with total floor area | | | | calculated with country-specific CO | | 2 factors and with 100% renewable electricity reported at zero kg CO | 2 per kWh. | we expect to save c. 220 tonnes of packaging and 50 tonnes | | people warm over the winter months. 13 500 46 300 47 300 2 6. Heads are the average monthly number of full-time equivalent employees, agency workers and contractors. of 57,000m , have certified or internal of paper waste every year. 7. The 2021/22 CO 2 e emissions, carbon intensity and packaging intensity, which is shown on the following page, have environmental management systems. been subject to assurance by ERM CVS. See independent assurance report on pages 80 and 81. 8. Emissions data for all years has been updated to include CO 2 e due to the use of company leased and owned vehicles. Previously this information was only included in the statutory GHG emissions disclosure tables. 62 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 63 17/18 17/18 17/18 2 2 Strategic Report ### Environmental, social and governance (ESG) continued ## Decarbonising Helping customers and suppliers ## our supply chain become more sustainable | Transport emissions | We also include environmental | Supplier engagement | We are focused on offering differentiated product and service solutions that help our customers achieve their ESG goals. By working | | --- | --- | --- | --- | | As a global business, we ship over 60,000 | considerations when selecting logistics | With over 2,500 direct suppliers and more | closely with our suppliers, we are providing sustainable products and circular solutions that span all stages of the industrial lifecycle. | | parcels to our customers daily, which makes | providers to ship our products. For example, | than 700,000 stocked products, we know | | | transportation a significant contr butor to | our UK logistics partner is committed to | that the carbon footprint of our suppliers | | | our overall carbon footprint. By 2029/30, we | investing €7 billion in green technologies | and the products they produce is the | | D g a are targeting a 25% reduction in Scope 3 by 2030. biggest driver of carbon emissions in our transport emissions per tonne of product supply chain. To address this, we have set a Together, these efforts have resulted in a sold against a 2019/20 baseline. 3 target for 65% of suppliers by spend to set 17% reduction in Scope 3 transport SBTs by 2025. | We are switching to lower-carbon transport | emissions per tonne of product sold since | | | | | | --- | --- | --- | --- | --- | --- | | modes from air to road and sea, which is | 2019/20. Moving forward, we will implement | At our global supplier conference in July | | | | | helping to drive reductions in transport | further measures to reduce our Scope 3 | 2021, we asked 450 suppliers to commit to | | | | | emissions. For example, we moved our | transport emissions and disclose our | setting SBTs. As of 31 March 2022, 19% of | | | | | product replenishments from the UK to our | progress on an annual basis. | our suppliers have done so. Furthermore, | | | | | | | | Specify | Maintain | | | Asia Pacific DCs from air to sea in 2019/20 | | we updated our supplier ethical trading | | | Protect | Compare 1 which has led to an 80% reduction in policy in 2021/22 to include a commitment Research transport emissions across these lanes. for our suppliers to set SBTs by 2025. Install Improve Procure In addition, in 2021/22 we switched a In 2023/23, we will continue to partner with Partner proportion of our European customer our strategic suppliers to help them improve deliveries from air to road, which reduced their ESG performance while bringing new 2 | emissions intensity by 14% | across these | sustainable technologies, circular products, | | | | | --- | --- | --- | --- | --- | --- | | lanes compared to 2020/21. | | packaging and service solutions to market. | Our DesignSpark platform is a | Our sustainable product solutions help our | Our innovative and data-driven | | | | | hotbed of design and innovation for | customers optimise their operations, reduce | technologies are optimised to help | | | | | sustainable engineering solutions. | costs and improve resource efficiency. Our | our customers maintain efficient and | | | | | The platform brings together a | products sit across categories and include | sustainable operations. RS Industria | | | | | community of 1.2 million engineers, | everything from variable speed drives and | connects factories and provides | | | | | professionals and students from | high-efficiency motors through to low-energy | essential data and condition monitoring | | | | | 32 countries to learn, develop | lighting and automated solutions that offer | reports to optimise performance, | | | | | and design sustainable technologies | environmentally friendly alternatives. | promote equipment longevity and | | | | | that improve people’s lives. | | minimise air, water and energy leakage. | ## 17% For example, one of our latest activist In 2022/23, we will be introducing a Our integrated supply solutions also engineering campaigns is inspiring new range of sustainable RS products provides an in-house MRO reduction in intensity of the community to develop air quality to continue to provide our customers procurement service for industrial and Scope 3 transportation solutions. greater choice and confidence in manufacturing customers, which helps 3 emissions since 2019/20 sustainable alternatives. streamline their purchases while consolidating their supply chains to become greener and more efficient. ## What’s next? Carbon: • Drive forward our net zero plan for DCs, offices and vehicles • Increase onsite renewable energy generation and use of low-carbon technology Packaging: ## Shifting our product • Introduce additional automated packaging processes • Continue to use recycled and recyclable materials, including the use of reusable packaging types such as eco-totes and pallets ## transportation model in Europe Waste: In 2021/22, we implemented key changes across our European operations to source, • Achieve zero waste to landfill at sites with alternative facilities store and ship a greater percentage of our products regionally and locally. For • Collaborate with waste providers, non-governmental organisations and landlords to increase waste management systems and Design example, our expanded DC in Germany can now house up to 500,000 products Build Maintain redirect surplus inventory closer to our European customers to drive down costs, distance travelled and carbon Transportation: emissions in our supply chain. • Continue to decarbonise our logistics by shifting our transportation modes and reporting our annual Scope 3 emissions We are also shifting to lower-carbon forms of transportation, by prioritising road and Sustainable products and service solutions: sea freight over air. For example, we switched a proportion of our European customer 1. Tonnes of CO 2 e due to Scope 3 transport emissions for Asia Pacific product replenishments per tonne of • Introduce a range of sustainable RS products with eco-labels and certifications in 2022/23 deliveries from air to road in 2021/22, which reduced emissions intensity by 14% product moved. across these lanes, compared to 2021/22. We are also setting weight limits on what 2. Tonnes of CO 2 e due to Scope 3 transport emissions Supplier carbon: we deliver by air, so we deliver higher-weight items by road wherever possible. for European customer deliveries per tonne of • Continue to encourage our suppliers to set SBTs to reach 65% of our suppliers by spend by 2025 product sold. 3. Tonnes of CO 2 e due to Scope 3 transport emissions gn D M per tonne of product sold. 64 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 65 n C Re Strategic Report ### Environmental, social and governance (ESG) continued ## Inspiring future engineers ### Supporting UN SDGs ## and innovators | We are empowering the next generation of | In 2021/22, c. 4,200 universities, colleges | As part of our engagement with students, | | --- | --- | --- | | engineers, innovators and technologists to | and schools used RS and OKdo | the Grass Roots team promote competitions | | develop vital skills, experience and | educational products to teach c. 355,000 | and activities throughout the year to help | | inspiration to change our world. | students valuable technical skills. Over | young innovators and engineers develop | ## Championing education the next 24 months, we will be expanding and flex their skills, gain experience and By 2030, we are committed to reaching our higher education offer across our make new connections. one million young people with educational markets and expanding our presence on ## and innovation technologies, inspirational learning STEM learning – OKdo university campuses. content and immersive skills OKdo offers a broad range of coding and development opportunities. DesignSpark electronics products, tools and games Our DesignSpark platform is a hotbed of to get young people switched on to the As of 31 March 2022, our Grass Roots | | | | engineering design, innovation and | exciting possibilities of engineering from | | --- | --- | --- | --- | --- | | Our approach | Our commitments and progress | education programme has reached | | | | | | | resources for 1.2 million budding engineers, | a young age. | c. 420,000 future engineers and innovators | People and innovation are key | | | | hobbyists, professionals and students | | | --- | --- | --- | --- | --- | --- | | | 2030 actions Performance | | through our partnerships with professional | | Raspberry Pi computer boards are one of | | to driving a more sustainable | | | | across 32 countries. | | | | | | engineering institutions, universities and | | our most popular products to teach | | and inclusive world. | Inspiring future engineers and | | youth programmes. We are supporting | | | | | | | | To support students, we added a new Grass | programming and computing in an easy and | | | innovators: | c. 420,000 | | | | | | | | young people from primary school through | Roots education platform focused on | affordable way. In 2021/22, OKdo shipped | ### Engineers, innovators and • Reach one million young people with | | | young engineers and students | to higher education on this journey. | youth-led content in June 2021. This | c. 1.89 million Raspberry Pis which | | --- | --- | --- | --- | --- | --- | | technologists are the beating | educational technologies, learning content | | | | | | | | reached through Grass Roots | | addition has resulted in a 30% growth in | delivered £6.2 of royalty payments to the | | | and skills development to support future | | Higher education | | | | heart of the global industrial | | education since 2020/21 | | new young users (under the age of 25) to | Raspberry Pi Foundation. The Foundation | | | engineers and innovators | | We partner with professional engineering | | | | sector – making amazing | | | | the DesignSpark platform over the last two | is a UK-based charity that works to put the | institutions and universities to offer a broad | | | | | years, meaning we now support c. 356,000 | power of computing into the hands of | | --- | --- | --- | --- | --- | --- | | happen every day and solving | Purpose-driven innovation: | | range of educational products and services | | | | | | | | young users to learn vital engineering skills. | people all over the world. | | | • Engage with 1.5 million engineers and | 276,000 | | | | that enable young engineers and innovators ### some of the world’s most innovators in creating socially responsible | | | engineers and innovators | to learn the skills needed for their future | In addition, 5,000 micro:bits were donated | | --- | --- | --- | --- | --- | | pressing challenges. | and sustainable solutions | | | | | | | engaged in purpose-driven | careers. | to the BBC’s do your :bit challenge. | innovation initiatives ### To support them, we are since 2020/21 ### committed to building skills ### and fostering innovation with Social impact partnerships: ## Purpose-driven ## • Support our social impact partners to develop 1,260 ### 1.5 million engineers and solutions that improve lives – including ## lives improved through innovation ### innovators by 2030. supporting The Washing Machine Project the TWMP Iraq pilot (TWMP) to help 100,000 people in need Encouraging innovation As a purpose-led business at the heart of the global industrial sector, we are passionate about nurturing innovative technologies that will benefit people and the planet. Over the next decade, our aim is to bring together 1.5 million engineers and innovators to create sustainable solutions that will help shape a better future. In 2021/22, we launched several new initiatives through DesignSpark to engage our online community of 1.2 million students and engineers to co-create sustainable solutions that improve lives. For example, our #ActivistEngineering initiative set the challenge of delivering cutting-edge environmental and social innovations. In addition, our air quality project sought to improve indoor air quality ## Launching a new innovation through innovation by engaging 17,000 engineers in a unique innovation challenge. ## hub in Texas Looking ahead, we will continue to provide businesses and individuals with resources In a first step towards bringing our DesignSpark community into a physical space, we and technology to create and test new opened the DesignSpark Innovation Centre in November 2021, in Texas, US. solutions that address pressing Working in partnership with Lake Walk, the 8,000 m² facility will act as an sustainability challenges. entrepreneurial hub for new innovation by creating an ecosystem for local start-up businesses, technology researchers and creatives to collaborate. As of 31 March 2022, there are 12 start-ups in residence who are making use of our OKdo donated 5,000 micro:bits to the BBC’s do your :bit global challenge in 2021/22. The competition provided pocket-sized codable computers to tools, resources, products and support to prototype new technologies that will deliver 8–18 year-olds around the world, who were tasked with developing social and environmental innovations that address the UN SDGs. positive social and environmental outcomes. 66 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 67 Strategic Report ### Environmental, social and governance (ESG) continued ## Social impact ### Supporting UN SDGs ## partnerships We support social impact programmes that drive meaningful change through the power of education and innovative engineering solutions. In 2021/22, this included ## What’s next? two key partnerships: | | | Education for engineers: | Empowering | | --- | --- | --- | --- | | The Washing Machine Project | Engineers Without Borders | | | | 70% of the world’s population lack access | | • Expand our innovation | | International to an electric washing machine. While start-up network of centres and We have been partnering with Engineers ## our people handwashing clothes might sound l ke a hubs across multiple geographies Without Borders-International (EWB) simple task, it disproportionately affects the • Roll out our higher education since 2020/21, to support their mission to wellbeing and livelihoods of women in offering across key markets in place global responsibility at the heart low-income communities around the globe. the next 24 months of engineering. ### Our approach Our commitments and progress To tackle this challenge through innovation, Sustainable solutions: As a sponsor of their Engineering for ### we work with TWMP and TWMP • Continue to develop DesignSpark Our unique team of over People Design Challenge, we encourage 2030 actions Performance | Foundation to support their mission of | | #ActivistEngineering campaigns to | | | --- | --- | --- | --- | | | 20,000 students a year to take part in | | 7,600 individuals is the | | providing accessible, manual washing | | cover wider ESG challenges | | design challenges that broaden their Engaged employees: ### lifeblood of our business. | machines that allow women to take | | • Introduce new tools and resources | | | | | --- | --- | --- | --- | --- | --- | | | awareness of the social, environmental and | | | • Achieve and maintain an employee | 75 | | charge of their lives. | | to help engineers build sustainability | Every day, their passion and | | | | | economic impacts of their engineering | | | engagement score in the top 10% of | | employee engagement score solutions across four countries. into their design processes high-performing companies ### We have generated £218,000 to support expertise enable us to delight (out of 100) • Support start-ups with resources ### TWMP Foundation. This includes a our customers and make As well as providing funding for the and technology to create and test corporate donation of £97,000 made in April ### challenge, we also offer critical skills amazing happen for new sustainable solutions Inclusion: 2022. In addition, 65 of our colleagues training to students to boost their soft skills. ## a better world. • Ensure our team is reflective of the customers, 32% volunteered their time to build washing Social impact partnerships: We also sit on the grand finalist panel to suppliers and communities we serve by machines for TWMP’s first pilot project in women in leadership roles judge and select the winning ideas. • Roll out additional projects and working towards 40% of our leaders being ### We are working hard to create Iraq, which has positively impacted the lives support activities for TWMP women and 25% being ethnically diverse Over the last two years, we have ### of 1,260 people. • Collaborate with EWB to drive a purpose-led culture where extended the challenge beyond the UK ### innovation through annual design our people are proud and Health and safety: By the end of 2023/24, TWMP’s mission is and South Africa to reach students in the challenges • Aim for zero accidents involving our people 20% ### to deliver at least 7,500 machines to excited to come to work every US and Australia. 100,000 disadvantaged people around increase in our all accident ### day. We are investing in their the world. To support TWMP to achieve frequency since 2020/21 ### wellbeing, development and, this goal, we will need to increase our ### fundraising activity in 2022/23. above all, empowering them Volunteering: ## • Inspire 50% of colleagues to volunteer to 185 ### to drive our journey towards support their communities and build new skills volunteers shared 2,000 hours of ### being a truly great Company. their time in 2021/22 ## £218k generated for TWMP Foundation. This includes a corporate donation of £97,000 made in April 2022. Our aspiration is to be in the top 10% of highest performing companies for engaged employees by 2030. In 2021/22, our employee engagement score increased to 75 – our highest score yet. This positive progress shows we are heading in the right direction when it comes to helping our people reach their full potential and thrive. 68 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 69 Strategic Report ### Environmental, social and governance (ESG) continued ## Engaged ## employees | Our people plan | | MyVoice | Talent development and leadership | | | --- | --- | --- | --- | --- | | In 2021/22, we appointed our first | | We know that having an engaged and | Attracting and retaining top talent is key to | | | Chief People and Culture Officer to drive | | motivated team is critical to ensuring a | our long-term success. Our talent strategy | Our industry-leading | | forward our global people plan focused | | high-performance culture and delivering | has evolved in recent years to seek | | | on five key areas: | | our future success. A high employee | a deeper understanding of the career | benefits in the US | | 1. Creating a purpose-led culture where | | engagement score is one of the best | aspirations of our colleagues to match | | | | our people are empowered to drive | indicators of being an employer of choice | the opportunities we have with developing | In 2021/22, we updated our benefits package and diversity | | | our strategy and collective success | and will help us to attract and retain the | the leaders we need for the future. | policies to provide industry-leading support to the majority of | | 2. Investing in upgrading the skills of | | best talent to support our ongoing | | our US employees. Actions included: | To enable our leaders to create a purpose- our leaders and workforce while business transformation. • Extending paid parental leave to 12 weeks for maternity led culture, we launched our global | | rewarding great work | | | leave and two weeks for supporting parents or foster parents | | --- | --- | --- | --- | --- | | | | We gather regular feedback through our | leadership framework Amazing Leaders in | | | 3. Providing an excellent employee | | | | • Extending domestic partner benefits by enabling | | | | annual MyVoice survey to understand how | January 2021. Developed through extensive | | | | experience where our people feel able | | | employees to enrol their partners in health and dental plans | | | | our people feel about working for us and | internal consultation, the framework binds | | | | to show up every day as themselves | | | • Adding transgender benefits to our health plans by | | | | what we can do to better support them. | together our leadership values under three | | | 4. Facilitating a fantastic candidate | | | | including additional coverage to meet their individual needs | | | | In March 2022, 75% of our workforce | critical behaviours that help us be our best: | | | | experience | | | • Launching the Mom project to encourage and support | | | | responded. The findings showed our | passion, humility and trust. | | | 5. Rewarding managers based on the | | | | mothers back into the workplace after childbirth | employee engagement score increased quality of the human and authentic again to 75 – up from 74 in 2020/21 and These behaviours and core leadership skills relationships they build 72 in 2019/20. are reinforced through regular discussions Our people plan sets the roadmap for our and training sessions that enable Our employee engagement continues to journey to being a truly great Company over peer-to-peer learning and connection. In trend in the right direction. We are on track the next three years, outlining what we need February 2021, we facilitated 150 Learning and development Reward and benefits Volunteering to achieve our ambition to be one of the to do to be the best for our people. conversations on how to become an We continued to invest in skills, education In addition to supporting our people in their We introduced two paid volunteering days most engaged companies, globally. Our amazing leader in 10 languages. and formal training programmes in 2021/22. career development, it is important that we for all employees in 2020/21. This enables aspiration is to be in the top 25% by 2025 Working with educational leaders Degreed, offer industry-leading rewards and benefits our people to participate in charitable and and top 10% by 2030. | we launched our My Academy platform in | to attract and retain the right talent, reward | education initiatives that boost their physical | | --- | --- | --- | | July 2021, with the goal of migrating all | excellence and retain our position as an | and mental wel being, as well as benefiting | | existing and new development programmes | employer of choice. | the communities that surround us. | onto a single global learning hub. | | Beyond the provision of physical and social | In 2021/22, 185 people volunteered nearly | | --- | --- | --- | | The My Academy platform now includes | wellbeing benefits, we are committed to | 2,000 hours to support their chosen | | all mandatory training, compliance and | supporting our people financially to create a | charitable cause, or one of our social impact | | new-starter content across multiple | sense of belonging and ownership. We | partners – The Washing Machine Project or | | languages in one centralised space. As at | regularly evaluate our incentive schemes | Engineers Without Borders-International | | March 2022, over 85% of our people have | and benefits packages. This includes | (see page 68). Volunteering was limited | | accessed 49,000 unique learning, training | exceeding minimum legal requirements in | during the year due to the challenges of | | and development opportunities. This is also | areas such as holidays, parental leave and | physically volunteering due to the COVID-19 | | supplemented with our investment in a | pension provision. | pandemic and we plan to increase | | state-of-the-art, multi-language learning | | participation in 2022/23. | It is important that our people have the programme with TED&Work. | | opportunity to share in the success of the | By 2030, we want to inspire 50% of our | | --- | --- | --- | | For our leaders, our Management Matters | business that they help create. In the UK, | employees to use their volunteer time to have | | programme provides ongoing learning | we support our people by providing: | a positive impact on global communities. | | activities to over 1,200 people managers. | • Advance payments: To help our people | | | Launched in October 2019, Management | avoid debt, we offer access to earned pay | | | Matters promotes core leadership skills | when needed without charging interest. | | | through inspiring monthly live webinars, | This scheme allows a withdrawal of up to | | | learning paths and skill sharing initiatives. | 40% of earned pay before payday to help | | | In 2021/22, this activity was supplemented | them with their financial security | | | by quarterly virtual global leadership events. | • Affordable loans: We provide access to | | | Participation continued to grow in the year, | loans at lower-than-market rates which | | | with around half of our EMEA, Americas | are repaid via employee salaries on a | | | and Asia Pacific leaders participating. | monthly basis to save them the burden of | | paying high-interest rates We continued to support apprenticeships in • Retail discounts: We offer unlimited 2021/22 with 284 employees on England access to a range of deals, special offers Apprenticeship Levy funded programmes and savings across a wide range of and 151 apprentices graduating into retailers. Around 76% of our employees permanent roles. We also received 5% Club ## Developing our future shapers access these benefits Gold status in the UK, with 12% of our UK workforce in ‘earn and learn’ positions. Launched in March 2019, our Future Shapers programme invests in tomorrow’s leaders by developing leadership skills and experience for those who have the ambition and potential to make a big impact. In 2021/22, we received 122 applications from 19 countries for 14 Future Shapers positions. The selected cohort received award-winning executive training, coaching and mentoring from the Ivy House master class programme. AMAZING LEADERS 70 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 71 ### SHOW PASSION ACT WITH HUMILITY DEMONSTRATE TRUST Strategic Report ### Environmental, social and governance (ESG) continued ## Health, safety ## Inclusion ## and wellbeing Our approach Gender Target Zero performance • All our sites have health and safety Empowering our people to bring their true We are committed to promoting gender The health, safety and wel being of our management systems in place. Of these, ## What’s next? selves to work creates a culture of diversity within our leadership team and people underpins everything we do. 26 sites are certified to ISO 45001 or an excellence where everyone can thrive. We across the Group. Our ambition is for 40% Through our Target Zero programme, we equivalent standard, covering 66% of floor Engaged employees: are proud to support our people in achieving of our leaders to be women by 2030, with are committed to protecting our people, area and 44% of sites. • Reviewing our end-to-end | their best by building an inclusive workplace | an interim target of 35% by 2025. As of | reducing incidents and supporting physical | | | | --- | --- | --- | --- | --- | | | | | Promoting mental health and | employee listening strategy to | | that supports everyone, irrespective of | 2021/22, 32% of our leaders and 44% of our | and mental health. In 2021/22, we achieved: | | | | | | | physical wellbeing | further strengthen engagement | | ethnicity, disability, age, religion, sexual | Board are female. Across RS Group, our | • Our All Accident frequency rate declined | | | | | | | Ensuring our people are happy, healthy and | • Further rollout of our Amazing | | orientation or gender identity. | gender representation sits at a near 50/50 | by 23% to 0.53 per 200,000 hours worked | | | | | | | able to perform at their best is vital to our | Leaders framework | | | split (see table below). | in 2021/22 against our 2019/20 baseline, | | | | Ethnicity | | | success. With the impact of COVID-19 | | however was up 20% from 2020/21. 40 Inclusion: Every day we work to grow the diversity of We run several initiatives throughout the affecting colleagues around the world, we accidents were reported in the year • Extend inclusion training to all our team to ensure it fully reflects our year to promote gender diversity within the continued to implement measures to (2020/21: 29), including 23 lost time employees and leadership teams ## people and the customers, suppliers and group. Elevate, our Women’s Employee Global support their wel being in 2021/22. accidents (LTAs) and 17 first-aid only • Sponsorship of the Rainbow the communities we serve. That is why we Resource Group, is sponsored by our Chief accidents, up from 15 and 14 respectively To provide emotional support to our people, LGBTQ+ Tour of Cambridgeshire ## are targeting 25% ethnically diverse leaders Operating Officer and hosts monthly diversity in 2020/21. we trained over 120 mental health first UK bike ride by 2030, with an interim target of 18% Elevate & Connect sessions to share • LTA frequency rate increased to 0.31 per aiders and 300 people managers. This • Automated, self-service mental | by 2025. | learnings and facilitate discussion. We | | | | | | --- | --- | --- | --- | --- | --- | | | | and inclusion | 200,000 hours worked from 2020/21. A | | | | | | | | support is supplemented by an app that | health awareness training to be | conducted several programmes in 2021/22 In 2021/22, 11% of our leaders and one total of 252 calendar days were lost due to enables people to set action plans for accessed any where, any time including the 30% Club which promotes member of our Board, representing 11% of training LTAs. This is an average of 11 days lost specific areas of their life and to improve female mentorship, along with a more per LTA in 2021/22 compared to 22 days Health and safety: the Board, were ethnically diverse. We their mental and physical health. in-depth development programme in per LTA in 2020/21. • Supporting our people back acknowledge that we still have a long way to In 2021/22, we launched several collaboration with LHH Penna entitled Our COVID-19 response to working safely and flexibly in go, however we are committed to ensuring initiatives to ramp up our focus on • The increases occurred as there were Women in Leadership. | | | | | We have all been affected by the COVID-19 | our offices | | --- | --- | --- | --- | --- | --- | | that we hold ourselves accountable by | | diversity and inclusion, including the | more accidents as employees returned to | | | | | | | | pandemic over the last two years. During | • Ongoing focus on safety and | | being proactive in our recruitment practices | Celebrating International Women’s Day in | launch of a new global inclusion | site post COVID-19. This is being | | | | | | | | these testing times, we have prioritised the | avoiding preventable accidents, | | and internal development programmes to | March 2022, we hosted three internal | training module through the My | addressed through enhanced safety | | | | | | | | health, safety and wellbeing of our people | including LTA rates | | encourage ethnically diverse talent to thrive. | events. Firstly, a roundtable discussion was | Academy platform. To date, 90% of | training and awareness measures. | | | while ensuring ongoing business continuity. Additionally, a key priority for 2022/23 is to held with women across RS Group to hold our people have completed the • None of the accidents reported in the year Volunteering: encourage more of our workforce (where transparent conversations about career module which is designed to raise resulted in life-changing injuries and there By implementing early-stage controls and • Encouraging our employees to use appropriate) to declare their ethnicity in progression, work-life balance and mental awareness of our biases and the were no work-related fatalities. adhering to government requirements, all their two paid annual volunteering our HR systems. health. This was followed by a talk from impact these have on the decisions • We piloted a safety programme to target DCs remained operational throughout days, giving their time and skills to Roma Agrawal who spoke about being a we make. From 2022/23, this training the sites with the highest LTA rate from the 2021/22. Our Crisis Management Team met We are creating a culture where we can have a positive community impact woman of ethnic diversity in a male will be mandatory for all new starters. previous year. Following a successful trial regularly to ensure our safety measures authentically celebrate and transparently dominated industry. Finally, Remarkable in 2020/21, we initiated the first formal were implemented and maintained discuss the ethnic diversity of our people. This training complements other Women closed the day with a masterclass programme in 2021/22 across three DCs. effectively and that DCs were able to This means listening to the challenges of inclusion training initiatives such as on ruthless compassion. • Near miss reporting continued in 2021/22, respond to the evolving situation. our employees, acknowledging the change our Include Me programme, a highly with 13,770 near misses reported, an required and finding appropriate solutions. In 2021/22, we were featured in the FTSE personal and immersive inclusion During 2021/22 we launched our future average of 1.76 per head and 38% up This is an ongoing journey and we continue Women’s Review, a government-backed learning module for 240 of our people working model ‘Unity’, to offer our office- on 2021/22. This increase was due to to build this path as we travel along it. independent, voluntary and business-led leaders, which seeks to promote based colleagues greater choice and improved reporting and by encouraging initiative aimed at increasing female equality through the values of flexibility over where they work. This will We are signatories to Business in the additional reporting of unsafe acts, corporate representation. RS Group ranked passion, humility and trust. promote wellbeing and attract global talent. Community’s Race at Work Charter in conditions and near misses. in the top half (33rd) of the FTSE 100 the UK and the US CEO Pledge, which Rankings 2021 Women on Boards and in reinforces our commitment to enhancing Leadership. We also ranked 8th in the representation across all levels of FTSE 350 peer group of industrial and our business. service companies. To read more about our gender diversity performance, our 2021/22 Gender Pay Gap can be found on our website: ## 100% rsgroup.com/esg. of sites have health and safety management systems in place 2021/22 gender split in numbers: | | Total employees Management | | | | | 2 | | Board of Directors | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Gender | 2021/22 2020/21 | | 1 | 2021/22 2020/21 2021/22 2020/21 | | | | | | | | | 3,843 | 3,629 | | | 42 | | 36 | | 4 | 4 | 3 | Female | (50%) | (50%) | (32%) | | (30%) | (44%) | | (44%) | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 3, 811 | 3,737 | | 89 | 84 | | 5 | | 5 | | Male | (50%) | (50%) | (68%) | | (70%) | (56%) | | (56%) | | 1. This excludes one permanent employee that we do not have a gender record for. 2. Permanent employees who operate at a senior level in the Group and typically, although not exclusively, are the Senior Management Team and their direct reports. Temporary employees (three female and one male in 2021/22), contractors and agency staff are not included. 3. The 2021/22 management gender split has been subject to assurance by ERM CVS. See independent assurance report on pages 80 and 81. 72 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 73 Strategic Report ### Environmental, social and governance (ESG) continued ## ESG ### Supporting SDGs ## governance | | Commitment from the top | We continued to perform strongly in leading | Updated annually and published in seven | | --- | --- | --- | --- | | | Our commitment to ESG is driven by strong | ESG ratings in 2021/22. Our CDP Climate | languages, the Code details requirements | | | governance from the very top of the Group. | scores were A- for our action and disclosure | related to anti-br bery and corruption, | | | | on climate change, for both direct action | competitive behaviour, privacy, data | | Doing business | The Board has strategic oversight of ESG. | | | | | | and supplier engagement. We were also | security, human rights and whistleblowing. | Lindsley Ruth, our Chief Executive Officer, rated A by MSCI and achieved EcoVadis is responsible for ESG and also maintains The Board receives updates on ethics and Gold medal status. | responsibly | | oversight of our ESG Committee which is | | compliance matters every two months. To | | --- | --- | --- | --- | --- | | | | chaired by Non-Executive Director, Joan | In 2021/22, the Group commissioned | ensure compliance, we provide mandatory | | | | Wainwright. Our President, Global Supply | external assurance on select environmental | Code of Conduct training and share copies | | | | Chain is the Senior Management Team | and social data from ERM CVS. See pages | of our Code to all employees. In 2021/22, | | | | (SMT) sponsor for ESG and our VP Social | 80 and 81 for the full assurance report. | we expanded training beyond our senior | | Our approach | Our commitments and progress | | | | | | | Responsibility and Sustainability leads the | | leaders to all our people. | To read more about our ESG approach, | As we accelerate our growth, | | | development and execution of our 2030 | | | | --- | --- | --- | --- | --- | --- | | | 2030 actions Performance | | | performance and progress, our 2021/22 | Human rights and modern slavery | | it is essential we do so | | | ESG action plan. | | | | | | | | ESG Pack can be found on our website: | We are committed to upholding, protecting | | responsibly by acting as a | Incentivising ESG progress: | | | rsgroup.com/esg. | | | | | | Our strong ESG leadership approach | | and advancing the human rights of all the | | | • ESG-related targets included in our | c. 40% | | | | | | | | is complemented by a suite of policies | | people who work within our business and | ### compliant, trusted and | | employee rewards programme across | | | Sustainability-linked loan | | | --- | --- | --- | --- | --- | --- | | | | of Group employees will | and procedures that ensures robust | | across our global supply chain, in line with | | transparent partner. Our | all levels and geographies | | | To embed a strong ESG approach and | | | | | have their annual incentive | governance, ethics and compliance across | | UN Global Compact Principles 1 and 2. | facilitate action around our 2030 ESG action | robust ethics and compliance | aligned to Group climate | our business and wider supply chain. | | | | --- | --- | --- | --- | --- | | | | | plan, we moved our £300 million revolving | We support the principles set out in the UN | | approach ensures that doing | performance in 2022/23 | | | | | | | Alignment to best practice | credit facility to a sustainability-linked loan | Declaration of Human Rights and the | | the right thing underpins | | We align to external frameworks and | (SLL) in 2021/22. Maturing in 2024, with a | International Labour Organisation Core | Responsible supply chain: | | | | standards to ensure we adhere to best | one-year extension option, the loan is linked | Conventions, including those on child | | --- | --- | --- | --- | --- | --- | | everything we do. | • Evaluate our suppliers against our high ethical | 40% | | | | | | | | practice and to enhance comparability | directly towards the achievement of three of | labour, forced labour, human trafficking, | and environmental standards. Set ESG of suppliers by spend are objectives for strategic suppliers of our ESG performance data. our most material 2030 ESG actions, non-discrimination, freedom of association ### By integrating ESG targets in EcoVadis rated and 29% have | | | | namely our Scope 1 and 2 CO | 2 e emissions, | and collective bargaining. Our UNGC | | --- | --- | --- | --- | --- | --- | | our employee rewards | signed our improved ethical | For our reporting, we align to the sector- | | | | | | | | packaging intensity and percentage of | | Communication on Progress can be found | | | trading declaration | specific recommendations of the | | | | | programme and collaborating | | | management that are women. | | on our website: rsgroup.com/esg. | Sustainability Accounting Standards Board ### with thousands of suppliers (SASB). We are also members of the United Policies and standards We do not discriminate in our employment to raise ethical and Nations Global Compact (UNGC) and our Our global compliance framework ensures policies and consider all applications for priorities are informed by the UN SDGs. that a risk-based approach is adopted employment fairly. For those with ### environmental standards, we across our business and supply chain. This disabilities, we provide training, career ### are driving positive change We are early supporters of the Task Force is supported by a suite of policies and development and promotion opportunities. on Climate-Related Financial Disclosures ### within our business and procedures to ensure the highest standards | | (TCFD) and in 2021/22 we conducted our | | We also recognise freedom of association | | --- | --- | --- | --- | | across our industry. | | of ethics and compliance in all that we do. | | | | first climate scenario analysis. A summary of | | by allowing our people to establish and join | | | our TCFD progress can be found on pages | | organisations of their own choosing. In | Code of Conduct 78 and 79 and our full disclosure can be 2021/22, 1,674 employees were part of Our Code of Conduct (Code) sets out the found in our TCFD Report 2021/22 available collective bargaining arrangements. standards and behaviours that we live by. on our website: rsgroup.com/esg. To incentivise action around our 2030 ESG commitments, we introduced a climate-linked KPI to our employee rewards programme in 2022/23. This means that all employees who qualify for the annual incentive, c. 40% of Group employees, will be incentivised to deliver our science-based Scope 1 and 2 carbon reduction target, aligned to our ambition to be net zero in our direct operations by 2030. 74 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 75 Strategic Report ### Environmental, social and governance (ESG) continued ## ESG Responsible ## governance continued procurement Embedding ESG standards with Conflict minerals and hazardous our key suppliers materials ## What’s next? We are committed to supporting our As a provider of industrial and electronic suppliers to raise ESG standards across our products, our commitment to compliance Incentivising ESG supply chain. From sourcing respons bly and quality policy sets out our approach to progress: to strengthening labour practices and keeping the products we sell free from • Embedding ESG KPIs into annual developing a sustainable distribution model. conflict minerals and hazardous substances. incentives and objectives To achieve this, we have due diligence Being a proactive supply chain steward is processes to identify and verify the source not only the right thing to do, it delivers Responsible supply chain: of the minerals contained in our products significant value to our customers by giving • Ensuring all suppliers have an and we work closely with suppliers to them greater assurance, confidence and ethical trading declaration in place address challenges. choice over their purchasing decisions. • Encouraging our strategic suppliers We support the Responsible Minerals to become EcoVadis rated, In 2021/22, we strengthened processes Initiative and the efforts of human rights set SBTs and ESG KPIs for across every stage of supplier interaction. organisations to end violence and atrocities our partnerships In particular, we targeted our top 65% of in Central Africa, where many conflict • Engaging RS PRO suppliers to suppliers by spend (c. 380 businesses) as materials are sourced including the become members of Sedex to well as RS PRO suppliers, to embed our Democratic Republic of Congo and nine increase supply chain vis bility ESG standards within their processes. adjoining countries: Republic of Congo, and meet social compliance Highlights from 2021/22 include: Central Africa Republic, South Sudan, • 100% of suppliers on our existing RS Zambia, Angola, Tanzania, Burundi, database are risk screened using the Rwanda and Uganda. TA15 tool against over c. 650 global | government-issued lists. | In North America, we comply with the | | | --- | --- | --- | | • Since May 2019, 112 inspections of RS | Dodds Frank Act and, as a result, request | | | PRO Asia suppliers have taken place. This | Conflict Minerals Reporting Templates | | | covers 90% of RS PRO suppliers | (CMRTs) from all applicable suppliers. We | | | operating in higher-risk sourcing regions. | have collected CMRTs for 75% of applicable | | | • In February 2022, we introduced an | suppliers for our business in North America. | | | improved ethical trading declaration and | A number of our suppliers in Americas are | | | asked all suppliers to commit in a phased | also Group suppliers, which means we have | | | rollout. As at 31 March 2022, 29% of | CMRTs for 25% of our top 3,000 Group | Scan for a full list of our codes, | | suppliers by spend have committed. | suppliers. | policies and standards | • In early 2021/22, we partnered with In May 2022, we published our first Conflict Whistleblowing vary from market to market but their Data and information security EcoVadis to understand the ESG Minerals & Materials of Concern Statement Speak Up, our dedicated whistleblowing purpose will always be to prohibit any Guided by our information security policy, performance of top suppliers and target to offer an annual update of our ongoing policy and helpline, promotes an open and arrangement which is designed to reduce we have a robust information security improvements. As at 31 March 2022, 40% efforts in this area. This is available on our accountable culture where employees can fair competition. programme, aligned with the principles of of suppliers by spend are EcoVadis rated. website: rsgroup.com/esg. raise ethical concerns confidentially without NIST-CSF and ISO 27001. We recognise • We formed a new partnership with Sedex Our competition law compliance policy sets fear of victimisation. The independent the high level of trust that our customers, to improve supply-chain visibility and ESG out the requirements of customer, supplier reporting tool is operated by a third party suppliers and employees place in us. This standards for our RS PRO suppliers. and market engagement. We received no and available to all our global employees. is why we maintain a high level of focus on • In July 2021, we asked over 450 suppliers fines or penalties under applicable bribery, | | | data and information security as part of | to set SBTs at our global supplier | | --- | --- | --- | --- | | In 2021/22, we received 15 Speak Up | corruption or anti-competitive behaviour | | | | | | our cyber security breach / information loss | conference. As at 31 March 2022, 19% of | | reports globally and they were reviewed | laws in 2021/22. | | | | | | principal risk (see page 53). | our suppliers by spend have committed to | and monitored by our Audit Committee. Privacy set SBTs. Appropriate actions were taken to address Led by our Chief Information Security and We respect the privacy of our colleagues, them. We continued to deliver Speak Up Compliance Officer, our information security customers and suppliers by upholding the training, awareness and refresher team conducts regular horizon scanning to confidentiality of their personal information. campaigns to promote awareness and use identify emerging cyber security risks and Regular risk-based analysis helps inform of the facility throughout the year. new innovations. This includes staying up to key areas of focus and a dedicated speed with the latest regulation, delivering ## £300m Anti-bribery and corruption compliance toolkit is available to all staff. mandatory information security training to We have a zero tolerance stance on all To embed privacy considerations into our all our staff and raising awareness of sustainability-linked loan to help forms of br bery and corruption and are project processes, our global network information security throughout the year. facilitate ESG action committed to conducting our business of local data champions continued to affairs in line with UN Global Compact All of our employees received dedicated provide relevant information to our staff Principle 10. Our Group-wide anti-bribery information security training in 2021/22. and take appropriate action. The Group policy covers our stance on bribes, gifts and We also collaborated with security operational audit and risk team also support hospitality, facilitation payments, political specialists Cybermaniacs to produce a our Data Protection Officer with reviewing and charitable contributions. series of short videos providing information the process. security tips to our staff to keep them In 2021/22, we delivered anti-bribery In 2021/22, 47% of our workforce undertook engaged, safe and compliant. training to 5,220 employees globally. privacy training, with more frequent training Anti-competitive behaviour made available to employees who handle We will compete fairly and vigorously data as part of their role. wherever we do business. In doing so, we always comply with the competition and anti-trust laws in force locally. These laws 76 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 77 Environmental, social and governance (ESG) continued # TCFD: Our progress # Taskforce on Climate-related Financial Disclosures (TCFD) response Climate change is one of the greatest challenges facing our world today. As a critical partner to the global industrial sector, we are committed to reducing our climate impact, while providing sustainable product and service solutions that enable our customers and suppliers to address their climate goals. The table below summarises our TCFD disclosure for 2021/22 in line with our commitment to providing transparent and quality climate reporting. In 2021/22, we worked with an external TCFD partner to identify our key climate-related risks and opportunities (CRROs), complete climate scenario analysis and report against TCFD's recommendations. ![img-0.jpeg](img-0.jpeg) ![img-1.jpeg](img-1.jpeg) Scan to read our full TCFD Report 2021/22 # Listing Rule We have complied with the requirements of Listing Rule 9.9.6R, by including climate-related financial disclosures that are consistent with the TCFD recommendations across its four pillars and 11 recommendations. Our action and disclosure are consistent with the TCFD's recommendations for a first-time disclosure and we will continue to progress in 2022/23 with greater quantification of the financial impact of our CRROs and Scope 3 emissions. | **TCFD** (2021/22) Science-based targets covering Scope 1, 2 and 3 emissions reduction submitted to the SBTi for verification | Signatories of the Taskforce on Climate-related Financial Disclosures (TCFD) since 2020 | | --- | --- | | | Science-based targets covering Scope 1, 2 and 3 emissions reduction submitted to the SBTi for verification | | | Climate leadership score of A- for our 2021 CDP climate action and disclosure for both direct action and supplier engagement | | Recommendation | Our action | Find out more | | --- | --- | --- | | **Governance –** Disclose the organisation's governance around climate-related risks and opportunities | | | | a) Describe the Board's oversight of climate-related risks and opportunities | Our Chief Executive Officer (CEO) is accountable for RS Group's response to climate change. The CEO ensures the Board has strategic oversight of the Group's CRROs, 2030 ESG action plan and its six climate-related actions. The Board ensures climate factors are considered in annual corporate planning and in short and long-term strategic decisions. | **TCFD 2021/22 Report (regroup.com/seg)** **Principal risks** (pages 52 to 55) **Corporate Governance** (pages 84 to 131) **2021/22 ESG Pack (regroup.com/seg)** | | b) Describe management's role in assessing and managing climate-related risks and opportunities | The Board is supported by the Audit Committee who review CRROs and TCFD analysis annually and ensure integration into financial disclosures, before recommending them to the Board for approval. The Board is also supported by the Remuneration Committee, which in April 2021 agreed to the addition of a climate API to executive remuneration and wider employee rewards for 2022/23. The Senior Management Team (SMT) reviews CRRO results annually and is responsible for ensuring that teams are developing plans to mitigate risks and leverage opportunities. The CEO has oversight of the ESG Committee in executing our climate strategy. The ESG Committee sets our net zero plan and reviews performance quarterly. They also ensure that the Group's CRROs, climate-scenario analysis and TCFD compliance are reviewed annually. The SMT Risk Committee oversees the Group's risk management approach and, in 2021/22, recommended to the Board that climate change move from being an emerging risk, to a principal risk rated as medium to low, which the Board approved. Both Committees are supported by the TCFD Steering Group, which is chaired by the VP Social Responsibility and Sustainability, with a relevant VP-level lead for each pillar. The TCFD Steering Group meets monthly to assess activities, ensure compliance with TCFD requirements and complete climate scenario analysis. They also ensure that wider management are identifying, assessing and responding to CRROs to mitigate risks and leverage opportunities. | | # Recommendation Our action # Strategy – Disclose the actual and potential risks and opportunities identified over the short, medium and long term a) Climate-related risks and opportunities identified over the short, medium and long term b) The impact of climate-related risks and opportunities on businesses strategy and financial planning c) Resilience of our strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario To assess our results, CRROs in consultation with conducting quality research on the Group over the short, medium and long term scenarios, due to changes in scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios for 2°C or lower scenarios # Risk management – Disclose the actual and potential risks and opportunities identified over the short, medium and long term a) Our processes for identifying and assessing climate-related risks b) Processes for managing climate-related risks c) How processes for identifying, assessing and managing climate-related risks are integrated into our overall risk management CRROs are managed across the Group's consultation with the potential size. The Group defines likelihood is category long term (over 10 years) Group to better use CRROs and CRROs are then reported on. From the report on CRRO has an overall risk management report on. Updates and key risks of their bi-annual risk management strategy. In 2021/22 risk, rated as medium # Metrics and targets – Disclose the actual and potential risks and opportunities identified over the short, medium and long term a) The metrics we use to assess climate-related risks and opportunities, in line with strategy and risk management process b) Scope 1, 2 and 3 greenhouse gas (GHG) emissions and the related risks c) Targets to manage climate-related risks, opportunities and performance against targets To understand and perform performance targets approach with reference to an annual basis. • Extreme heat • • Severe weather • • Decarbonisation • • Actions to reduce reduction delivery • • Sustainable product range with a 2°C or lower scenario We were early advised to reduce the reduction including rating by CDP in 2021/22. Our 2030 ESG action plan is progressing for 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2022/23 and continues to progress in 2 78 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 Strategic Report ### Environmental, social and governance (ESG) continued ## ESG assurance | In 2021/22, the Group commissioned ERM Certification and Verification Services Limited (ERM CVS) to conduct independent external | | | Our conclusion | • A review of the internal KPI definitions used | The limitations of our engagement | | --- | --- | --- | --- | --- | --- | | assurance of a selection of its most material ESG metrics for the first time. This move reflects the Group’s commitment to ensuring a strong | | | Based on our activities, as descr bed below, | and calculation methodologies applied; | The reliability of the assured data is subject | | ESG approach and robust reporting and disclosure. The metrics assured are defined below. Metrics 1, 3 and 4 form part of the Group’s | | | nothing has come to our attention to | • Virtual visits to three RS Group operating | to inherent uncertainties, given the available | | £300 million sustainability-linked loan. | | | indicate that the 2021/22 data for the ESG | facilities in the UK and USA, to review the | methods for determining, calculating or | | | | | KPIs listed under ‘Scope’ above and shown | data measurement, collection and | estimating the underlying information. It is | | 1. Scope 1 and 2 CO | 2 e emissions – this is measured as tonnes of CO | 2 e and uses market-based factors for Scope 2 emissions. This | | | | | | | | on page 62, 63 and 72 of the Report are not | reporting processes at the facility level | important to understand our assurance | links to our science-based target to reduce absolute emissions from our own operations by 75% by 2029/30, from 2019/20. fairly presented, in all material respects, and to test the consistency of reported conclusion in this context. 2. Carbon intensity – defined as tonnes of CO 2 e due to Scope 1 and 2 CO 2 emissions per £m revenue, with revenue being the Group’s with the reporting criteria. 2021/22 data for the energy and fuel use For the 2021/22 revenue figure used in revenue per the audited Group income statement. underlying the GHG emissions and for Our assurance activities the calculation of the carbon intensity and packaging with underlying source data 3. Packaging intensity – this is defined as the packaging that the Group uses for deliveries to customers and movements of products Our objective was to assess whether the packaging intensity KPIs, we have not and related documentation; between its sites. It is measured as tonnes of packaging per £m revenue. Again, revenue is the Group’s revenue per the audited Group 2021/22 data for the ESG KPIs in the scope independently assured this figure. Our • An analytical review of the 2021/22 data income statement. This links to our action to reduce packaging intensity by 30% by 2029/30, from 2019/20. of our assurance are reported in work in relation to this figure was limited to for all RS Group locations included in the | | | accordance with the principles of | | confirming its consistency with the 2021/22 | | --- | --- | --- | --- | --- | | 4. Percentage of management that are women – this is defined as individuals who operate at a senior level in the Group and typically, | | | reporting boundary, including a review of | | | | | completeness, comparability (across the | | revenue figure in RS Group’s audited | | | although not exclusively, are the Senior Management Team and their direct reports. This links to our action for 40% of our leaders to be | | the completeness of the data and of the | | | | | Group) and accuracy (including | | accounts for the year ended 31 March 2022. | | | women by 2029/30. | | mathematical accuracy of the | | calculations, use of appropriate conversion | | | consolidation of the data; | Due to travel restrictions as a result of | | --- | --- | --- | --- | | ERM CVS’s assurance statement to RS Group plc is included below. | factors and consolidation). We planned and | | | | | | • A review of the unit conversion and | COVID-19, our assurance work for the | performed our work to obtain all the emission factors used in the calculation 2021/22 reporting period was conducted information and explanations that we of the GHG emissions data and the using a combination of desk-based reviews believe were necessary to provide a basis alignment of these factors with the of data and information, and virtual ## Independent assurance statement to RS Group plc for our assurance conclusion. relevant sources; interviews and meetings. We did not A team of sustainability and assurance • A review of the definition of management undertake any in-person visits to specialists performed the following activities: roles applied by RS Group in the RS Group’s operations. Engagement summary | | | | | • Interviews with RS Group’s management | calculation of the percentage of | | | --- | --- | --- | --- | --- | --- | --- | | | | | | personnel and external consultants | management that are women, and a | | | Scope of our | Whether the 2021/22 data for the following ESG key performance indicators (KPIs) shown on pages 62, | | | | | | | | | | | responsible for the management of the | review of employee data by gender and | Gareth Manning | | assurance | 63 and 72 of the Report are fairly presented, in all material respects, with the reporting criteria: | | | | | | | | | | | ESG KPI data to understand and evaluate | grade; and | Partner, Corporate Assurance | | | • Total Scope 1 and 2 CO | 2 e equivalent emissions (tonnes CO | 2 e) | | | | engagement | | | the data management systems and | • A review of the presentation in the | | | --- | --- | --- | --- | --- | | • Carbon intensity (total scope 1 and 2 tonnes CO | 2 e per £m revenue) | | | 24 May 2022 | | | | processes (including internal review | Report of the data relevant to the scope | | • Packaging intensity (tonnes per £m revenue) processes) used for measuring, collecting of our work, to ensure consistency with • Percentage of management that are women (percentage) and reporting the ESG KPI data; our findings. Reporting period 2021/22 (1 April 2021 – 31 March 2022) Reporting criteria WBCSD/WRI Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard RS Group’s internal reporting criteria and definitions Assurance standard International Standard on Assurance Engagements (ISAE) 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information Assurance level Limited assurance Respective RS Group is responsible for preparing the Report and for the collection and presentation of the data and responsibilities information within it ERM CVS’s responsibility is to provide a conclusion on the agreed scope based on the assurance activities performed and exercising our professional judgement ERM CVS is a member of the ERM Group. The work that ERM CVS conducts for clients is solely related to independent assurance activities and auditor training. Our processes are designed and implemented to ensure that the work we undertake with clients is free from bias and conflict of interest. ERM CVS and the ERM staff that have undertaken this engagement work have provided no consultancy related services to RS Group in any respect. 80 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 81 Strategic Report ### Non-financial information statement The Companies Act 2006 and section 172 Under the Companies Act 2006, our Directors are required to act in a ## Non-financial Section 172 way that they consider, in all good faith, would most likely promote the success of RS Group plc and its stakeholders. Throughout 2021/22, we have strived to continue to demonstrate how, as a considerate, sustainable, responsible and solutions-driven business, our Board ## information statement of Directors and the Senior Management Team have achieved this. Throughout this report, there are many examples of how we have taken into account our key stakeholders: our people, customers, suppliers, communities and shareholders. Details of how the Board ## statement in particular has considered these stakeholders’ interests can be found in the Corporate Governance Report on pages 92 to 94. | | Environmental matters | | Social matters | | | | --- | --- | --- | --- | --- | --- | | This section of the | | | | | The long-term consequences of decisions that are taken | | | Policies and standards | | Policies and standards | | | | | | 1 | | 1 | | | | • Code of Conduct | | • Code of Conduct | | Building on the work required for our Journey to Greatness to strengthen our strategic plans Pages 22 and 23 | ## Strategic Report • Group Environment, Health & Safety • Environment, Health & Safety Ensuring we have robust data driven insight to support our key decisions Pages 22, 23 and 31 | constitutes the | Policy Statement | Policy Statement | | | | --- | --- | --- | --- | --- | | | | | Integration of Needlers Holdings Limited, Synovos, Inc. and John Liscombe Limited into the Group’s business to create | Pages 41 and 42 | | | Further reading | Further reading | effective synergies | | ## Group’s • Environment (pages 60 to 65) • Environmental, social and governance Continuing our review of acquisition pipeline opportunities that provide sensible and logical builds to our business Page 33 ## non-financial (pages 58 to 81) Employees The interests of our employees Policies and standards Anti-corruption and anti-bribery ## information | | | 1 | | | Prioritising the health, safety and wellbeing of our workforce Page 73 | | --- | --- | --- | --- | --- | --- | | | • Code of Conduct | | Policies and standards | | | | statement, | | | | 1 | | | | • Environment, Health & Safety | | • Code of Conduct | | | Building a purpose-led culture and investing in our people to attract and retain the best talent Page 69 1 | | Policy Statement | | • Anti-Bribery Policy | | | --- | --- | --- | --- | --- | | produced to | | 1 | | Providing the My Academy learning platform Page 71 | | | • Gender Pay Gap Report | | • Group Marketing Campaigns Policy | | 1 • Diversity and Inclusion Policy • Group Competition Law Continuing our programme of Board employee engagement Page 95 ## comply with 1 • Employee Data Protection Policy Compliance Policy The need to foster our business relationships with our customers, suppliers and regulators • Bullying and Harassment Policy • Group Embargoes Policy ## sections 414CA 1 • Speak Up Policy (whistleblowing) Expanding our product range, supplier depth and global service solutions offering Pages 10, 12, 26, 27 30 Further reading | and 414CB of the | | | | and 31 | | --- | --- | --- | --- | --- | | | • Our strategic priorities – | Further reading | | | | | high-performance team (page 30) | • Governance, ethics and compliance | Aligning our operating plans to build organisational capabilities and a scalable market strategy Pages 22, 23, 30 and 31 | | ## Companies Act • Key performance indicators – All (pages 74 to 77) Engaging with our suppliers to help ease significant supply chain challenges Pages 21 and 94 | 2006. The | Accidents (page 39) | • Corporate governance report | | | --- | --- | --- | --- | | | • Risks, viability and going concern | (page 84 to 131) | The impact of the Group’s operations on the environment and community | | information listed | (pages 50 to 57) | • Audit Committee report | | Enhancing a purpose-led culture, driving our environmental, social and governance goals in our commitment for a better world Pages 58 to 79 • Community (pages 66 to 68) (pages 100 to 105) ## is incorporated by Driving to be a sustainable and responsible leader in our sector Pages 74 to 77 • People and health & safety (page 73) Principal risks • Corporate governance report Supporting suppliers to provide more sustainable and clean products Page 64 ## cross-reference and Further reading (pages 84 to 131) • Risks, viability and going concern Our reputation for having high standards and sound ethical conduct • Nomination Committee report ## some of the below (pages 50 to 57) (pages 106 and 107) Code of conduct: for our people (Speak Up) and our suppliers Pages 75, 76 and 77 ## policies can also Non-financial key performance Respect for human rights Ensuring anti-bribery training is regularly rolled out to our employees Page 76 indicators (KPIs) Policies and standards ## be found on our Ensuring we apply a zero-tolerance approach to modern slavery Page 75 1 Further reading • Code of Conduct | | • Modern Slavery Act Transparency | | • Business model (pages 26 and 27) | | | --- | --- | --- | --- | --- | | corporate website. | | | | The need to act fairly between members of the Company | | | | 1 | • Our strategic priorities | | Statement Continuing to deliver robust financial results and growth in share price Pages 40 to 49 (pages 28 to 31) Further reading • Non-financial KPIs (pages 38 and 39) Increasing operating effectiveness, delivering increased mid-teen operating profit Page 46 • Governance, ethics and compliance • Environmental, social and governance (page 74 to 77) (pages 58 to 81) The Strategic Report was approved by the Board on 24 May 2022 and is signed on its behalf by: Lindsley Ruth David Egan Chief Executive Officer Chief Financial Officer 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 1. These policies and standards can be found on our corporate website. no intention or obligation to update forward-looking statements contained herein. 82 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 83 Corporate governance ### Corporate governance report ## “ Our governance framework ## operates at an appropriate ## level to ensure the Board ## functions effectively and ## with purpose in the interests ## of all our stakeholders.” Rona Fairhead Chair | May 2021 and Alex Baldock joined as | As planned, the Board underwent an | shareholders a choice to attend the AGM in | | --- | --- | --- | | Non-Executive Director in September 2021. | internal evaluation this year and the | person or remotely via an electronic audio | | Details of the search process involved with | conclusions demonstrate that the Board | platform. Further details can be found in our | ## Chair’s letter Alex’s appointment are set out on pages continued to perform effectively with all Notice of AGM. 106 and 107 of the Nomination Committee members feeling able to challenge and Finally, I would like to give my heartfelt Report. I would like to take this opportunity contribute appropriately. Results of the thanks to my fellow Board members and all to thank Bertrand for his valuable evaluation and future priorities for the Board the people of RS Group for their hard work, | | promote a more sustainable and inclusive | Most Diverse Employers in the UK; | contr bution to the Board throughout his | are set out on page 99. In accordance with | | | --- | --- | --- | --- | --- | --- | | Dear fellow shareholder | | | | | commitment and support during the year | | | world for our people, customers, suppliers, | launching our mandatory annual inclusion | tenure, particularly in challenging our drive | the UK Corporate Governance Code 2018 | | | On behalf of the Board, I am pleased to | | | | | and look forward to us, together, building | | | communities and shareholders, given it | programme for all employees; and | towards digitisation. I would also l ke to | (the Code), the next Board evaluation will be | | | present our Corporate Governance Report | | | | | further on these successful foundations. | | | represents one of our most material issues | introducing the My Academy learning | welcome Alex, who has already made | facilitated by an external party and details | | for the year ended 31 March 2022. as well as some of our greatest opportunities platform that has transformed how our real, positive impact. will be shared in the Annual Report and Rona Fairhead My first year as Chair of the Board has been to drive value and the key areas in which to people connect, develop and grow. The Accounts for 2022/23. Chair We have also appointed a further an exciting and uplifting one. We have limit risk. recent appointment of our Group Chief 24 May 2022 Non-Executive Director, Navneet Kapoor, The year ahead continued to prioritise the health and safety People and Culture Officer further Despite the challenges of COVID-19, we who will join us on 1 June 2022 and I As a Board, our overriding objective is of our amazing workforce and to deliver strengthens what is important to us as have continued to engage actively and would like to welcome him to the Board. to ensure that we deliver value to every product and service solutions to our an organisation and what we will continue | customers. The Group has increased its | constructively with our major shareholders. | | | one of our stakeholders and do so in a | | --- | --- | --- | --- | --- | | | | to focus on going forwards. | In July 2021, Ian Haslegrave resigned as | | | operating effectiveness, enhanced its | We view these interactions as hugely | | | sustainable and robust manner. We will | Company Secretary after 15 years in the approach and commitment to environmental, valuable and a significant influence on our Remuneration continue to maintain that focus as the role. On behalf of the Board, I would l ke social and governance (ESG) matters and plans to create long-term shareholder value. In early 2022, the Chair of our Company embarks on the next stage of to thank Ian for his dedication and support has strengthened relationships with These have been carried out both by our Remuneration Committee, Simon Pryce, its journey. and to welcome Clare Underwood, whom | suppliers at a time when global supply chain | Senior Management Team (SMT) and, | and I undertook a consultation process with | | | | --- | --- | --- | --- | --- | | | | | the Board appointed to take up the role in | We also continue to encourage shareholder | | challenges have been significant. The | where appropriate, by our Board, through | our major shareholders in relation to our | | | | | | | March 2022. Our thanks are also due | engagement and discussion through our | | Group has also undergone a change of | investor meetings, our Investor Event and | proposed Directors’ Remuneration Policy, | | | | | | | to Andy James who stepped up as | general meetings. The AGM will be held on | | name from Electrocomponents plc to RS | our substantial consultation on our | which requires shareholder approval at our | | | | | | | Acting Company Secretary during the | 14 July 2022 and this year we are offering | | Group plc as it continues to pursue its | Directors’ Remuneration Policy proposed. | July 2022 Annual General Meeting (AGM). | | | intervening period. Journey to Greatness, which was presented We believe that the proposals presented to Other areas of focus for the Board over the to stakeholders at our Investor Event in shareholders are aligned with their best past year have included consideration of the March 2022. Further details can be found interests as well as reflect our Executive Group’s product range expansion plans for on pages 21 to 23 of the Strategic Report. Directors’ ambitions for, and commitment to, our customers as well as supporting the We have continued to reward the the ongoing transformational success of the Group’s enhanced supply chain strategy confidence of our investors and we are Group. Further details on the Remuneration and the IESA / Synovos integration plans pleased to return to the FTSE 100 for the Policy and the consultation process can be (see page 42). first time in over 19 years. found on pages 108 to 129 of the As always, our people continue to be our Remuneration Committee report. Overview of the year strongest and most powerful differentiator During the year, the Board continued to Board meetings, composition and we recognised their contr bution with a oversee the Group’s medium and long-term and governance one-off bonus for all permanent employees. strategy, in particular the work required for Many of the Board and Committee meetings Throughout the COVID-19 pandemic, we our Journey to Greatness, which will drive during the year continued to take place have continued to support our people, stronger revenue and high-quality profitable remotely due to COVID-19 restrictions, working hard to provide a safe and positive growth. The Board has continued to be however, we do not believe this has return to our offices. We are proud to have updated on the Group’s acquisition pipeline, adversely affected the Board’s oversight been recognised by Mental Health England supply chain activity, regional growth and decision-making capability. We believe for our efforts to equip managers with the initiatives and ongoing programmes to the Board has remained true to its requisite confidence and skills to deal with engage, retain and develop talented respons bilities of ensuring that all decisions mental health and now have over 100 individuals to achieve our goals. taken have been in the best interests of our mental health first aiders round the globe. stakeholders, the Group as a whole and the We have substantially strengthened our Where poss ble, we have moved our Company’s long-term success. Details of ESG approach – For a Better World – which workforce to a flex ble hybrid working model how the Board has accomplished this are sets out our 2030 action plan, details of to empower our people and ensure that we set out on pages 86 to 99. which can be found on pages 58 to 81 of this continue to attract and retain the talent we Annual Report. This approach is integrated We have seen two changes in the need for the future. We have progressed a into the way we operate and is key to composition of our Board this year: range of dynamic people initiatives everything we do. The Board supports Bertrand Bodson stepped down from including: a diversity and inclusion (D&I) keenly the Group’s ESG action plan to his role as Non-Executive Director in programme that placed us in the Top 50 84 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 85 Corporate governance ### Corporate governance report continued Number of meetings attended during the year ## Committee activities 2021/22 The Board held a mix of in-person and virtual meetings in 2021/22 and a ## Corporate breakdown of attendance is shown in the table below for the year ended 31 March 2022. Remuneration Committee Attendance at all meetings is strongly encouraged, however at times, due to • Reviewed the effectiveness of the remuneration unforeseen circumstances, Directors may not be able to attend. Directors who policy to support the next phase of the ## governance are unable to attend are provided with all meeting information and have the Company’s Journey to Greatness and to opportunity to discuss their feedback with the Chair or Company Secretary to support historical performance ensure their contributions are raised at the meeting. We are pleased to report • Completed extensive engagement with that in 2021/22 the overall attendance of all Directors was 100%. our top shareholders to gain support and ## at a glance obtain feedback of the proposed new remuneration policy Board | | | (scheduled) Audit Nomination Remuneration | | • Reviewed and aligned the 2021/22 incentive | | --- | --- | --- | --- | --- | | | 1 | | | outcomes to Company performance | | Alex Baldock | | | 5/5 2/2 – 5/5 | | 2 Bertrand Bodson 2/2 – – – Read more on pages 108 to 129 Louisa Burdett 9/9 4/4 4/4 8/8 ## The UK Corporate David Egan 9/9 – – – ## Governance Code Rona Fairhead 9/9 – 4/4 – Nomination Committee Bessie Lee 9/9 – 4/4 – Board leadership and Company purpose • Reviewed the structure, skills, knowledge, Simon Pryce 9/9 4/4 4/4 8/8 Our Board Pages 88 and 89 experience and diversity of the Board Lindsley Ruth 9/9 – – – Purpose, values, strategy and culture Page 90 • Identified and nominated for the approval of Engagement with major shareholders Pages 92 to 94 David Sleath 9/9 4/4 4/4 8/8 the Board two Non-Executive Directors, Alex Engagement with employees Page 95 Joan Wainwright³ 9/9 – 4/4 5/5 Baldock and Navneet Kapoor, to be appointed to the Board Division of responsibilities 1. Alex Baldock was appointed to the Board, Audit Committee and Remuneration Committee • Reviewed succession planning for Executive Division of responsibilities and governance framework Page 91 on 1 September 2021. and Non-Executive Directors and the SMT 2. Bertrand Bodson stepped down from the Board and Nomination Committee on 31 May 2021. 0-3 years 45-54 3. Joan Wainwright was appointed to the Remuneration Committee on 7 July 2021. Composition, succession and evaluation 3-6 years 55-64 Read more on pages 106 and 107 Board evaluation Pages 96 to 99 6+ years Nomination Committee Report Pages 106 and 107 Audit, risk and internal control Audit Committee ## Audit Committee Report Pages 100 to 105 Key activities 2021/22 • Reviewed the integration process for Effectiveness of internal and external auditors Pages 104 and 105 ## Risk management Pages 103 and 104 and objectives 2022/23 acquisitions and the effectiveness of their internal control systems | Remuneration | | • Reviewed the first phase of the Group’s review | | --- | --- | --- | | Directors’ Remuneration Policy Pages 113 to 118 | Board activities 2021/22 | of internal controls over financial reporting | | Directors’ Remuneration Report Pages 119 to 129 | • Continuing to manage the impact of COVID-19 | (ICFR) | • Acceleration of our strategy: The RS Way • Reviewed principal risks and opportunities in Throughout the year ended 31 March 2022, the Company was • Customer experience development (using digital and data) relation to the Task Force on Climate-related subject to the provisions of the UK Corporate Governance Code • Solutions-led strategy Financial Disclosures (TCFD) (Code). The Code is publicly available at www.frc.org.uk. The • Acquisition pipeline sections within this Annual Report and Accounts, as indicated above, • Regional focus Read more on pages 100 to 105 explain how the Principles of the five main sections of the Code have • Organisational capability and talent been applied. • Strengthen focus on ESG • Supply chain activity Compliance with the Code • Product range expansion The Board confirms that in its view, the Company has applied the Independent main Principles and has complied with all the relevant Provisions set Executive out in the Code during the year other than Provision 38. This year, Independent in line with best practice and shareholder guidance, we are making Board objectives 2022/23 strides towards fully complying with Provision 38 by committing to • Journey to Greatness reduce pension levels for existing Executive Directors by 14 July Key experience • Increased focus on ESG 2022, bringing their entitlement in line with the rate most commonly Gender Independence Board tenure Age of Directors • Regional deep dives received by our UK people. Further details are given on page 113. Digital 6/9 • Strategic transformation • Customer experience Distribution 4/9 • Supply chain focus Emerging markets 5/9 • Innovation ESG 3/9 • Product expansion and supplier strategy • Mergers and acquisitions (M&A) Finance 5/9 International operations 9/9 M&A 7/9 Service industry 4/9 Female 4 86 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 87 6 4 4 Male 5 2 3 5 2 Non-Executive Chair 1 Corporate governance ### Corporate governance report continued ## Bessie Lee Louisa Burdett ### Independent Independent ### Non-Executive Director Non-Executive Director | | Joined in March 2019 | Skills and | Joined in February 2017 | Skills and | | --- | --- | --- | --- | --- | | | | experience | | experience | | | Committee membership | | Committee membership | | | | | • Digital | | • Digital | | Our Board | • Nomination | | • Audit (Chair), Nomination, Remuneration | | | | | • M&A | | • Current financial | | | External roles | • Marketing and | External roles | experience | | | • Chief executive officer of Withinlink | advertising | • Chief financial officer of Meggitt plc | • M&A | | | • Chief executive officer of JLL Greater China | • Emerging markets | | • Service industry | Past roles ## of Directors • Non-executive director of Abcam plc • International • International • Group finance director at Victrex plc | | operations | | operations | | --- | --- | --- | --- | | Past roles | | • Chief financial officer at Optos plc and | | | | • Chief executive | | • Manufacturing | | • Chief executive officer roles at Mindshare, | | the Financial Times Group | | | | officer | | • Chief financial officer | | GroupM and WPP in China | | • Held roles at Chep Europe, a division | | | • Non-executive director of A2 Milk Company, | | of Brambles Ltd, GE Healthcare and | | | Ecovacs Robotics and United Group | | GlaxoSmithKline plc | | • Advisor to Didi Chuxing and Greater Pacific Capital ## Rona Fairhead Lindsley Ruth Simon Pryce Joan Wainwright ### Chair Chief Executive Independent Independent ### Officer Non-Executive Director Non-Executive Director | Joined in November 2020 | Skills and | Joined in April 2015 | Skills and | Joined in September 2016 | Skills and | Joined in November 2019 | Skills and | | --- | --- | --- | --- | --- | --- | --- | --- | | | experience | | experience | | experience | | experience | | Committee membership | | Committee membership | | Committee membership | | Committee membership | | | | • Chair | | • Digital | | • Strategic finance and | | • Distribution | | • Nomination (Chair) | | • Treasury | | • Audit, Nomination, Remuneration (Chair) | | • Nomination, Remuneration | | | | • Digital | | • Distribution | | capital markets | | • Electronics | | External roles | • International | External roles | • Sales and marketing | External roles | • M&A | External roles | • ESG | | • Non-executive director Oracle Corporation | operations | • Member of the CBI International | • M&A | • Chief executive officer of Ultra Electronics | • Emerging markets | • Director of NJM Insurance Group | • Sales and marketing | | • Member of the House of Lords | • Strategy | Trade Council | • Emerging markets | Holdings plc | • Service industry | | • International | Past roles: • Emerging markets • Non-executive director of Ashtead Group plc • Supply chain and • Member of the Council and a member • Strategy operations Past roles • President, Channel & Customer Experience, • M&A procurement of the Strategy and Finance Committee • Manufacturing • Strategy • Chair of BBC Trust Past roles TE Connectivity Ltd • Service industry • Management of The University of Reading • Defence industry • Minister of State in the UK Department for • Executive vice president of the Future • Vice president, Public Affairs, Merck & Co • Finance experience • International • International International Trade Electronics Group Past roles • Deputy commissioner of communications, • Trade and export operations operations • Non-executive director of HSBC Holdings • Held senior positions with TTI Inc and • Group chief executive at BBA Aviation plc U.S. Social Security Administration • Chief executive • Manufacturing • Chief executive plc and PepsiCo, Inc. Solectron Corporation • Held a range of international finance and officer • Electronics office • Chair and chief executive officer of Financial management roles at GKN plc, JP Morgan • Group finance officer • Chief executive • ESG Times Group and Lazards officer • Remuneration ## David Egan David Sleath Alex Baldock Clare Underwood ### Chief Financial Senior Independent Independent Company Secretary ### Officer Director Non-Executive Director | Joined in March 2016 | Skills and | Joined in June 2019 | Skills and | Joined in September 2021 | Skills and | Joined in March 2022 | Skills and | | --- | --- | --- | --- | --- | --- | --- | --- | | | experience | | experience | | experience | | Experience | | Committee membership | | Committee membership | | Committee membership | | Past Roles | | | | • Digital | | • M&A | | • Digital transformation | | • Governance | | • Treasury (Chair) | | • Audit, Nomination, Remuneration | | • Audit, Remuneration | | • Chief operating officer and group company | | | | • Distribution | | • International | | • Accelerating | | • Tax | secretary of John Laing Group plc External roles • Current financial External roles operations External roles omni-channel growth • Accountancy • Head of London and group company • Member of the CBI Economic Growth Board experience • Chief executive officer of SEGRO plc • Service-led business • Group chief executive of Currys plc • Embedding customer • Corporate law secretary of Cable and Wireless • M&A • Board member, European Public Real models focus • M&A Past roles Past roles: Communications plc • Emerging markets Estate Association • Finance • International • Group finance director of Alent plc • Chief executive officer of Shop Direct • Service industry • Manufacturing and operations • Held a variety of senior finance positions Past roles: • Managing director of Lombard and • International distribution • Chief executive Upcoming Board Changes | at ESAB holdings and Hanson plc | | • Finance director, SEGRO plc | | Commercial Director at Barclays | | | | --- | --- | --- | --- | --- | --- | --- | | | operations | | • Chief executive | | officer | | | • Non-executive director of Tribal Group plc, | | • SID and audit committee chair, Bunzl plc | | | | Navneet Kapoor will join the Board as Non-Executive Director | | | • Manufacturing | | officer | | | | | and chair of its audit committee | | • President, British Property Federation | | | | in June 2022. | | | • Management | | • ESG | | | | • Group finance director, Wagon plc • Risk management Other Directors who served during the year • Chief financial officer Bertrand Bodson stepped down from the Board on 31 May 2021. Biography details for Bertrand can be found in our Annual Report and Accounts for the year ended 31 March 2021. 88 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 89 Corporate governance ### Corporate governance report continued ## Division of ### Chair: Rona Fairhead ## responsibilities • Leading the Board and ensuring its oversight of strategy, performance, value creation, culture, stakeholders and accountability ## and governance • Shaping the culture of the Board • Promoting open, trusting, challenging discussions and debate and constructive relations ## framework between Non-Executive and Executive Directors • Ensuring appropriate Board capabilities • Representing the Company to shareholders and other key stakeholders • Developing productive relationships with the CEO, providing support and advice and constructive challenge where appropriate ## Board leadership and ### Senior Independent Independent Non-Executive ### Audit Committee ### Director: David Sleath Directors ## Company purpose ### Chair: Louisa Burdett • Evaluating the Chair’s performance • Overseeing and constructively • Monitors integrity of financial • Chairing the meeting of Non-Executive challenging strategy, performance statements and announcements Directors when evaluating the Chair and culture • Reviews the Group’s internal financial • Being available as an alternative • Providing independent external controls and internal control and risk communication channel for shareholders perspectives management systems • Being a sounding board for the Chair • Contributing independent views to the • Monitors the internal audit function Board’s deliberations • Manages the external Auditors • Satisfying themselves on the integrity of financial information and controls and systems of risk management ### Role of the Board The Board monitors the culture of the Assessing opportunities and risks Nomination Committee The Board’s principal responsibility is to organisation to ensure that it is aligned to The Board considers the principal risks The Board ### Chair: Rona Fairhead ensure the long-term sustainable success the Group’s purpose, values and strategy. and opportunities, including ESG, for the The Board comprises a majority of independent Non-Executive Directors. As can be • Reviews the structure, skills, of the Group as a whole. The Board is future of the business. Details of the risks seen in the tables and biographies on pages 88 and 89, our Non-Executive Directors knowledge, experience and diversity This includes: accountable to stakeholders for the Group’s assessed are set out in the Strategic have diverse backgrounds, skills and experience to enable appropriate challenge at of the Board • Receiving regular updates from the Chief Board and Committee discussions. None of them have any conflicts of interest in general, | financial and operational performance and | | Report on pages 50 to 57, together | • Identifies and nominates, for | | | --- | --- | --- | --- | --- | | | Executive Officer (CEO) that provide insight | | | whether from relationships with management, the Company or third parties which would | | is responsible for taking strategic decisions | | with consideration of the sustainability | approval of the Board, candidates | | | | into the business and how it is operating. | | | compromise their independence. There are processes in place for identifying and managing | | and providing oversight across the Group | | of the Group’s business model. | to fill vacancies | | | | • Receiving updates from the Chief People | | | any conflicts on particular topics which may arise and related party transactions. | • Leads succession planning for both ultimately to ensure stakeholder interests and Culture Officer on the people team At each Board meeting, the CEO and Non-Executive and Executive are protected. The Board aims to lead with approach in supporting the Group’s culture. Chief Financial Officer (CFO) present a Directors integrity and in a sustainable commercial • Receiving updates from the Board- comprehensive update on performance, Chief Executive Officer: Chief Financial Officer: manner to ensure value is created for all appointed employee engagement challenges, the competitive market and ### Lindsley Ruth David Egan the Group’s stakeholders. The Board also ### representatives on employee engagement possible M&A opportunities. The Chief Remuneration • Responsible for the Group on a • Responsible for strong financial provides leadership to executive and senior (see page 95). Operating Officer (COO) provides quarterly day-to-day basis management and implementing and ### Committee management and applies a robust • Receiving regular information on the reports to the Board to give an overview • Developing, leading and implementing monitoring effective financial controls ### governance framework to ensure that Chair: Simon Pryce usage of the Group’s whistleblowing on the external market, how components strategy • Developing the Group’s financial policies this leadership is delivered effectively. • Agrees the Remuneration Policy for facility and how reports have been of the business are performing and • Accountable to the Board for operational and strategies Executive Directors and performance • Ensuring a commercial focus across all The key topics the Board has focused on followed up, allowing it to assess the monthly performance, including customer remuneration structure for the SMT • Leading and instilling effective business activities and appropriateness this year, as well as those it plans to assess effectiveness of the facility and experience and digital. • Oversees SMT and Group employee Company culture of risk management for the coming year, are set out on page 87. actions taken. remuneration These reports are complemented by • Ensuring robust management succession • Supporting and advising the CEO • Creating opportunities to meet senior • Approves the design and targets for members of the SMT and other managers plans are in place Purpose, values, strategy employees and those identified as high incentive plans • Responsible for ESG, including and culture providing updates at Board meetings on potential at any level of the organisation. climate-related matters how their areas of the business are working To achieve the long-term sustainable value • Via the Nomination Committee, monitoring towards the achievement of The RS Way generation of the Group, the Board has Read more: Committee succession and talent pipelines for the and opportunities and risks faced within continued to work closely with the senior Reports on pages 100 to 129 Executive Directors and senior their areas. This ensures the Board has ### management team on the Group’s purpose Senior Management Team Treasury Committee management. oversight across the business, allowing of making amazing happen for a better world. ### CEO: Lindsley Ruth Chair: David Egan its governance processes to contr bute • Proposes and executes strategy • Monitors the Group’s Treasury Policy strongly to the delivery of our strategy. • Drives business performance • Implements policies and processes for • Ensures customer focus foreign exchange and option deals • Approves investments • Approves proposed Group capital • Culture / ESG structure changes • Approves changes to authorised Full details of our SMT are investments, counterparties and Matters reserved for the Board available on our website. borrowings All matters that have a material impact upon the Group are reserved for the Board and are formally set out in a schedule. Such matters include, but are not limited to: Matters for the Board CEO’s responsibilities related to the matter Reviewing and approving the Group’s The development, and successful achievement, of Group long-term strategic aims and objectives ### Company Secretary: Clare Underwood long-term strategic aims and objectives • Supporting and advising the Chair on various matters including the effectiveness and Approving material changes to the Group’s Assessing adequacy of management and control structure and where appropriate governance of the Board and succession planning management and control structure implementing non-material changes and / or proposing material changes • Managing the Board evaluation process and Board induction • Keeping the Board informed of corporate governance developments Approving the Group’s procedures for the Ensuring appropriate internal controls are in place • Supporting the Remuneration Committee Chair in remuneration design and implementation detection of fraud and bribery prevention and consultations On recommendation of the Nomination Ensuring appropriate management development and succession planning for SMT • Involved in the recruitment process for new Board members Committee, reviewing succession plans (for review by the Nomination Committee) • Advising the Board on governance for the Board and SMT 90 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 91 Corporate governance ### Corporate governance report continued ## The Board and our ## stakeholders Our Strategic Report on pages 34 and 35 demonstrates how the business considers and interacts with the Company’s key stakeholders: our people, customers, ## Product range expansion Journey to Environmental, social and suppliers, communities and shareholders. ## This section of the Corporate Governance An initiative designed to enable the Greatness governance (ESG) plan Report sets out how the Board considers Group’s product range expansion ambition A Group-wide focus on driving The Group introduced its strengthened 2030 ESG action plan – For these stakeholders. stronger revenue and high a Better World, in November 2021, and conducted an in depth The Board delegates the day-to-day quality profitable growth on review of its climate-related risks and opportunities operational decision making of the business our Journey to Greatness to the CEO and CFO with support from the SMT and their teams. The Board recognises, however, that doing so does not absolve it of its accountabilities to the See the Strategic Report See the Strategic Report See the ESG section of the Strategic Report Group’s stakeholders and the need to reinforce and support management’s | | Board actions | Suppliers | Board actions | Board actions | Suppliers | | --- | --- | --- | --- | --- | --- | | decisions by setting the tone from the top. | • The Board considered the Group’s product | • Build on our strong relationships with | • The Board was presented with an initial | • The Board received updates during the | • Collaborate with suppliers to offer our | | The Board must consider the needs of, and | range expansion plans to ensure alignment | existing suppliers and creating robust | briefing, followed by more detailed | year on the Group’s proposed 2030 ESG | customers sustainable product and | | impacts of its decisions on, all stakeholders | with the Group’s key stakeholders, as well as | relationships with new suppliers. | planning and timelines throughout the | action plan. It was fully supportive of | service solutions. | | as well as the consequences of its | discussed key pillars of product and supplier | • Align commercial, category and supplier | year. Board members entered into | management’s plan and the long-term | • Engage suppliers to raise ethical and | | | strategies, the wider digital ecosystem and | strategies incorporating the drive towards | detailed discussions with management, | value it would generate for the Group’s | environmental standards across our global | decisions in the long term. The Board also the development of supply chain capabilities developing a more sustainable hearing their insights and experiences, stakeholders. supply chain. From sourcing responsibly, recognises that not all of these decisions to ensure the plans were in the best interests product range. with the Board providing various • The Board received reports on the to strengthening labour practices and cutting result in a positive outcome for some of the majority of the Group’s stakeholders • Enhanced and scalable product compliance challenges for management to consider introduction of the 2030 ESG action plan in environmental impacts. stakeholders and that it must consider our | | and the Company as a whole. | assurance management. | ahead of the detailed planning phase | November 2021, including positive feedback | | | --- | --- | --- | --- | --- | --- | | stakeholders as a whole, sometimes having | | | | | Communities | | | | • Improve organisational alignment including | and final Board approval to launch. | from investors. | | | to base its decisions on stakeholders’ | Our people | | | | • Empower the next generation of engineers | | | | prioritisation of launches, enhanced supplier | | • The Audit Committee received an overview | | | contending priorities. | • Reduce manual administration jobs with | | Our people | | and innovators to develop vital skills | | | | marketing and stronger end-to-end | | of the Group’s key climate-related risks and | | | | greater value-added jobs. | | • Provide specific KPIs to drive increased | | and experience, by providing accessible | | | | trading focus. | | opportunities and first-stage results of its | | | Throughout the year, as well as reviewing | • Enhance employee engagement experience | | collaboration between our people. | | educational technologies, inspirational | | | | • Enhance digital and supply chain | | climate scenario analysis in February 2022. | | | and approving standard business as usual | with our customers and suppliers so | | • Ensure we have the right talent which is | | learning content and immersive skills | | | | capabilities, providing a more holistically | | The Committee reviewed and recommended | | | items, policies and governance processes, | increasing motivation and work satisfaction. | | supported appropriately and in the right | | development opportunities. | | | | focused operating model. | | for approval by the Board, the Group’s first | | | the Board received updates on: regional | | | areas of the business. | | • Support purpose-driven innovation to | | | | • Enable a broader and deeper inventory | | report under the TCFD framework. The | | Customers • Clarify accountabilities to make faster develop new technologies that will benefit business perspectives from EMEA, selection through the opening of our Board approved the report, which can be • Inject high-quality supplier product data in and higher quality decisions. people and the planet. Americas and Asia Pacific; our brand and extended DC in Bad Hersfeld, Germany. found on our website: rsgroup.com. all relevant languages. • Continue to improve our agility and the culture; innovation strategies including the • Increase local sourcing and apply capability Shareholders and wider investor Shareholders and wider alignment, speed and empowerment of Our people work of DesignSpark; our M&A pipeline; enhancements in the areas of non-stocked our people. • Create a safe, inclusive and dynamic culture community investor community investor relations; and technology. The items, deliver-to-promise and compliance. to attract the best people and enable them • Proactively manage and address ESG risks • Enhance opportunity for increased market Board also held its annual strategy meeting • Enable a broader and deeper inventory Customers to thrive and grow. and opportunities. share through product range expansions in selection through the opening of our • Build more holistic product and focusing on the numerous strands of the • Develop a purpose driven culture where • Publish the Group’s TCFD report to help several sectors. extended distribution centre (DC) in Bad service offerings to become a true Journey to Greatness which is designed our people strive to create triple bottom line shareholders understand the Group’s • Enhance margin enhancement through Hersfeld, Germany. solutions provider. benefits for people, planet and profit. climate-related risks and opportunities. to amplify our strategy, The RS Way. improving and developing our growth • Drive down our cost to serve our Further details of our Journey to Greatness accelerators. customers in all areas. Customers Others (including regulators) can be found on pages 22 and 23 of the • Refine our approach and service levels • Offer more sustainable product and service • Proactively manage and address ESG risks Others (including regulators) Strategic Report. to serve all customers and improve solutions to help our customers increase and opportunities. • Ensure customer and supplier data is customer experience. efficiency of their operations, cut costs and • Strengthen Group code of conduct and managed in compliance with the General Key decisions taken by the Board during reduce environmental impacts. ethical sourcing policy for suppliers Data Protection Regulations and other local the year, and their impact on stakeholders, Suppliers • Increase supplier vetting, management and demonstrating our commitment to jurisdiction requirements. | are set out in the table to the right and on | • Maximise the value we provide to our | | | | --- | --- | --- | --- | | | | ESG engagement to provide quality, ethical | governance, ethics and compliance | | pages 93 and 94 of this Report. | suppliers through their relationships with | | | | | | and sustainable supply chain assurance to | including modern slavery. | us with better alignment of product and our customers. • Maintain commitment to the principles of the service offerings. United Nations Global Compact and new • Reduce challenges to product expansion commitment to the Science Based Targets and increase the agility of the business initiative, United Nations Race to Zero to introduce new products to the offer. and the UN Global Compact’s Business Ambition for 1.5°C. Shareholders and wider investor community • Deliver stronger revenue and high quality profitable growth through benchmarking our business against best in class global standards and returns and funding investments in growth accelerators and potential strategic acquisitions. This will increase shareholder returns. 92 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 93 Corporate governance ### Corporate governance report continued ## Our people Acquisitions ## engagement Acquisitions as part of the Group’s M&A strategy How the Board can best hear the views, feelings and motivations of ## Stakeholder the Group’s people ## – Suppliers See the ESG section and page 95 See Strategic Report of the Corporate Governance One example of how the Board Report Board actions supported management this year was Board actions • The Board was regularly updated on the in relation to our supply chain, where • The Board received reports during the integration across the Group of recent management concentrated on doing year on the five employee engagement acquisitions, namely Synovos, Inc. the right thing by its suppliers while sessions facilitated by Bertrand Bodson, (Synovos), Needlers Holdings Limited, getting the best outcome for its Bessie Lee and Joan Wainwright. and John Liscombe Limited and their customers. Companies have seen a Further details can be found on page 95 subsidiaries. • The Board agreed and monitored the strain on supply chains globally and of this Report. integration of IESA and Synovos to the Board actively supported the • The Board maintained its responsibility for oversight of D&I via its Nomination create integrated supply solutions Group’s enhanced supply chain Committee where it also considered on a global scale. strategy. As part of this strategy, ## Employee engagement talent acquisition, development and we engaged extensively with our Our people retention as well as succession planning suppliers to understand the • Integrate Synovos, Needlers Holdings Betrand Bodson facilitated an employee engagement session • A town hall session for the SMT. See page 107 of the challenges they were facing and Limited and John Liscombe Limited with our people in EMEA, via our Management Matters platform, • Two separate coffee sessions, each with 14 employees Nomination Committee Report for further and their subsidiaries into the Group helped them where possible, for details on our D&I Policy Statement. shortly before he left the Board. Both Bessie Lee and Joan • A debrief with the local team at the close culture, providing the same opportunities example with transport. Our Our D&I policy can be found on our Wainwright also held employee engagement sessions with our for training, development and commitment to those relationships Bessie was able to feed back to the Board her first-hand corporate website. people in Asia Pacific and Americas respectively. Joan hosted employee benefits. led to us being first choice for many impressions of the breadth and depth of the CoE’s offerings, two sessions via our Management Matters platform. Bessie Our people suppliers when allocating their levels of staff motivation and the team’s commitment to Customers visited our Shanghai offices for an in-person meeting as well as • Provide an opportunity for our people to productivity and continued efficiency improvements. She products and materials. In turn, as • Provide an improved customer facilitating a Microsoft Teams session with our people in our feedback their opinions on the Group’s suppliers needed to reduce their also fed back questions from our people which included: experience through the creation of global | culture and ways of working, the Group’s | | | Centre of Expertise (CoE) in Foshan, China. All sessions were | | | --- | --- | --- | --- | --- | | | integrated supply solutions through the | burden of risk because their own | | • What impacts of COVID-19 would become permanent going | | leadership, structure and value, and how | | | very successful with a great deal of interaction. A case study of | | | | combination of IESA and Synovos. | supply chains may be worse than | | forward e.g. working from home arrangements | | management looks after its employees. | | | Bessie’s visit to Foshan is set out below. | | | | | others, for example in terms of raw | | • How high was China’s awareness of artificial intelligence | • Continue to enhance employee Suppliers materials, we placed firm orders and Bessie Lee’s engagement session at our CoE in Foshan, China and what was the Group doing in terms of bringing that engagement to help understand barriers • Provide an improved supplier experience to execution and how to mitigate or commitments ahead of others. This was to be held in person originally but due to COVID-19 awareness to the forefront through the global integrated supply remove them. meant that we were doing the right restrictions it was necessary to change at the last minute and • What investment would the Group make with regards solutions of IESA and Synovos. • Introduce the My Academy learning thing by one group of stakeholders manage the day virtually. However, the efforts of the local team to marketing and brand awareness platform and enhance performance Shareholders and wider ensured that the session was not compromised and included a which subsequently benefited The Board considered the questions and was happy that appraisal processes, as well as providing investor community another and, in the longer term, our virtual office tour to give Bessie a better feel for the office mental health awareness training for management would be addressing them with our people • Accelerate the Group’s potential dynamics as well as the facilities themselves. investors. This is an example of our management. via a series of town halls. for growth. vision to be first choice for all our • Adapt the approach to Board employee The day comprised: stakeholders and which the Board Our people were also sufficiently comfortable to ask Bessie engagement following the departure • A welcome session supports from the top. questions about her personal development journey as from the Board of Karen Guerra who was • An introductory meeting between the local management teams the nominated employee engagement well as asking how she saw the China tech giants’ and Bessie Director. platforms evolving. • A co-ordinated virtual lunch and virtual office walk Customers • Promote motivated and empowered employees with first class engagement with our customers. Suppliers • Promote motivated and empowered employees with first class engagement with our suppliers. 94 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 95 Corporate governance ### Corporate governance report continued Composition, succession Induction facilities and ultimately better understand Committee and facilitated by the Company and evaluation Following the appointment of any new the culture of the business. With the Secretary via an online questionnaire. The ## Our induction framework: ensuring our Director, the Chair and Company Secretary continuation of COVID-19 and its variants in scope of the evaluation covered the Board, Board Composition and training | | | ensure that a customised induction, to the | December 2021, Alex Baldock’s scheduled | its Committees, the Chair, the Senior | | --- | --- | --- | --- | --- | | The Board is pleased to welcome Alex | Directors understand the business and | | | | | | | Company and the role of the Board is made | site visit for January 2022 was postponed. | Independent Director (SID) and the | Baldock as a Non-Executive Director who ## the landscape in which we operate Company Secretary. The evaluation joined the Board on 1 September 2021. available. The induction programme is Evaluation based on the framework set out to the left questionnaire sought to obtain views on Alex is also a member of the Audit and Board evaluations provide invaluable insight and, depending on the newly appointed key corporate governance aspects as well Remuneration Committees and brings a and objectivity to the Directors and the Director, the framework is tailored to their as gauging the Board’s effectiveness. It significant amount of skills and experience Committees which in turn enables the skills, experience and needs. New Directors further gave the Directors an opportunity ### to the Board, particularly in the realm of Governance Digital and Board to improve its leadership, are provided with a Directors’ Manual which to provide constructive feedback on areas digital transformation and e-commerce. | | Outlining the UK governance | technology | | effectiveness and focus. Examining each | | | --- | --- | --- | --- | --- | --- | | | | | sets out the relevant information on the | | which they thought were effectively | | | landscape, including details | | | Director’s role and their corresponding | | | Further detail on the changes to the Board | | Understanding the technology | | | | | | | | Company’s approach to governance, | | managed and, conversely, those which | | | relating to directors’ remuneration, | | | responsibilities within the overall Board | | | can be found in the Nomination Committee | | infrastructure across the | | | | | | | | information on key Group policies and | | could be improved upon. | | | ESG and emerging governance | | | dynamic encourages collaborative decision | | | Report on page 106. | | organisation and the drive for | | | | day-to-day administrative matters as well trends and understanding our making and strategic clarity. The 2022/23 Board evaluation will be digital transformation. as historical Board packs. As part of the Board’s continuous | | internal governance framework | | | | facilitated externally in line with the Code. | | --- | --- | --- | --- | --- | --- | | development, the Directors receive regular | | | | An evaluation is undertaken by the Board | | | | and how the Board operates. | Provided by: | If circumstances allow, a site visit to one of | | | | updates from the Company Secretary as | | | | on an annual basis. For 2021/22 we | | | | | • Chief Technology Officer | our DCs is also arranged. This ensures that | | | | | Provided by: | | | conducted an internal evaluation which | | | well as a schedule of briefings and training | | • Chief Digital Officer | | | | each new Director can experience the • Company Secretary and team was led by the Chair of the Nomination offered externally. External training includes day-to-day operations of the distr butions • Global reward team facilitated events, forum discussions and seminars related to the listed company environment many of which were offered ## virtually. In 2021/22 the Board undertook Our three year evaluation cycle: further refresher training of the UK Market ### Finance and risk Strategy and Abuse Regulation and training on Task ### Force on Climate-Related Financial Understanding the Company’s marketplace Disclosures via the Audit Committee. capital structure, its finance Understanding our strategic Finally, the Board also receives regular requirements and the journey and gaining the updates from senior management on corresponding risks that we face. ## corresponding knowledge of the 2020/21 specific topics such as data protection, Provided by: industry within which we operate. supply chain and health and safety. The Internal led • CFO Provided by: Company Secretary is available to all evaluation • VP, Group Operational Audit ## • CEO, CFO and COO 2021/22 Directors whenever needed and ensures and Risk • Presidents of EMEA and Asia that both Directors and Committees have • Chief Information Security and Pacific RS Components and Internal led ## access to independent professional advice 2022/23 Compliance Officer Allied Electronics & Automation evaluation (at the Group’s expense) if they deem it • External Auditors External led • Presidents of Integrated Supply necessary to carry out their role effectively. Solutions and OKdo evaluation • SVP, Corporate Development • External brokers ### Supply chain Legal and ### and ESG compliance Understanding our supply chain Understanding our key Group capabilities and how we are driven policies and industry specific to provide an innovative and legislation which applies to the sustainable market-leading business and its obligations as a service in the long term. UK listed company. Provided by: Provided by: • President, Global Supply Chain • Company Secretary and team • VP, Social Responsibility and • General Counsel Sustainability ### Our investors Culture and people Understanding the make-up of our Meeting teams across the institutional investors and market business to experience and sentiments. understand the culture. Provided by: Provided by: • VP, Investor Relations • Chief People and Culture Officer • External brokers / advisors and team • Site visits 96 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 97 Corporate governance ### Corporate governance report continued Re-election Going concern and viability The Board’s statements on going concern Remuneration Committee’s work in this Notwithstanding the provisions of the The Board is responsible for assessing and viability can be found in the Strategic area is set out on pages 108 to 129. ## Our approach to Board evaluation Company’s Articles of Association the Group’s long-term viability and deciding Report on pages 56 and 57. This year we have consulted with our major | (Articles), all Directors are required to retire | if it is appropriate to adopt the going | | | | --- | --- | --- | --- | | | | Remuneration | shareholders in relation to our Directors’ | | and stand for re-election at each AGM. As | concern basis in preparing the Group | | | | | | The Board retains overall responsibility for | Remuneration Policy, which will be put to | | illustrated on pages 88 and 89, the Board | and Company accounts. | | | | | | ensuring that the remuneration practices of | shareholders at the Company’s AGM in July | has a diverse and appropriate range of skills The Audit Committee reviews and the business are aligned to the established 2022. We also continued to engage with our and experience and works effectively in its ## 1 challenges, where necessary, the Group’s purpose and values and linked to the major shareholders through numerous role. The external commitments of our | | | assumptions, process and assessment of | successful delivery of the Company’s | investor meetings and our Investor Event | | --- | --- | --- | --- | --- | | Design and planning | Directors are kept under review to ensure | | | | | | | its going concern and viability. Further detail | long-term strategy. Full details of the | which was held on 30 March 2022. | they have the time to effectively contribute The scope of the evaluation is designed and agreed by the Chair of the on these activities are set out in the Audit to the activities of the Board and all its Nomination Committee and the Company Secretary. Planning takes into Committee Report on page 102. Committees throughout the year. account the activities undertaken throughout the year and the focus during the year of the Board and each of its Committees. Valuable input is also taken The Board, following the internal evaluation from each Committee Chair who provides feedback on areas the evaluation process, also considers whether each should take into consideration. Director performs effectively and demonstrates their commitment to the role. The Board recommends that the Directors Outcomes from the 2021/22 internal evaluation be re-elected at this year’s AGM, with the Key outcomes from 2021/22 Actions for 2022/23 exception of Alex Baldock and Navneet Kapoor, who are recommended to be Board effectiveness and process 2 elected following their appointments on • While the level and balance of challenge is right, there is still encouragement • Encourage Non-Executive Directors to challenge the Execu ive 1 September 2021 and 1 June 2022 for the Non-Executive Directors to challenge he Executive Directors more Directors more. ## Formulate questionnaire respectively. and push harder. • Reduce length / granularity and improve consistency of Board papers using An online questionnaire is prepared by the Company Secretary which includes • Meeting agendas could be shorter with more efficient time allocation. clear summaries to highlight key issues / areas for discussion. a combination of rating scale and open-ended questions. Directors are able to Audit, risk and internal control Continued support for condensed meeting papers. • Return to a majority of in-person meetings, wi h virtual / hybrid meetings The Board is responsible for ensuring the • In-person meetings encouraged to build Board effec iveness. only for meetings with appropriate agenda topics. provide their feedback on a no-name basis should they so wish and due risks facing the Group are effectively • Ensure time is allocated within the agenda to allow increased focus on: regard is given to the previous year’s internal evaluation to ensure progress – Monitoring progress and execution of strategy; can be monitored. Directors are given the opportunity to speak to the SID and identified and controlled through the work – Capitalising on growth opportunities; and Company Secretary. of the Group risk team and internal audit – Technology, including the Group’s digital capabilities. activities. The Board has continued to • Continue to improve agenda to focus on key matters and reduce time spent monitor the established risk management on papers for information only. and internal control procedures to ensure • Improve internal and external training options list. that they continue to be appropriate and Strategy effective within the specific context of the Group’s activities. • Continued improvement in the quality of strategy execution and status • Implement a scorecard to enable regular monitoring of progress ## 3 updates positively received. and execution. The Audit Committee regularly reviews the • Monitoring progress and execution of strategy highlighted as an area of focus • Increase time devoted to competitors and our relative position. ## Evaluate and report effectiveness of the Group’s internal control for the Board. The Company Secretary collates and analyses the questionnaire responses and risk management systems. This year it • Good advancement of competitor landscape in terms of information, but and prepares separate reports containing the findings for the Chair, the SID increased discussion and debate relating to competition encouraged. also reviewed the risks and opportunities in and each Committee Chair. The findings distil and identify the strengths, relation to climate change. This review role Composition and succession challenges and priorities of the Board’s performance. Responses relating to is managed by various processes including: • Good satisfaction with the balance of the Board but increased focus on • Nomination Committee to continue to focus on succession planning the Company Secretary are analysed by the SID and recommendations are • Quarterly reporting by all material diversity required going forward. and diversity. included for discussion by the Board and each of the Committees. locations of their key internal financial controls (earlier during the year this Actions undertaken from the 2020/21 internal evaluation frequency was monthly due to the higher Key outcomes from 2020/21 Actions in 2021/22 risks during the more significant effects of the COVID-19 pandemic). Board effectiveness and process • An annual review by all business locations • Posi ive support for the way in which he CEO has led the agenda items and • Attention was given to the balance between the number of items on ## 4 and functions of their operational risks and the way in which discussions at meetings are set up. the agenda and the length of Board papers and meetings. associated controls with a supporting • Recogni ion that the Board has adapted well and remained agile during • Physical meetings and face-to-face gatherings, via Board dinners, ## Agree actions COVID-19 when physical meetings could not take place. were scheduled. review and assessment by the Group’s The findings and recommendations are presented by the Company Secretary • While the impact of COVID-19 highlighted the strength in efficiency and internal audit team. to the Nomination Committee. Each Committee also considers its own findings allowed all members to contribute in virtual meetings, it was identified that • The cycle of internal audits throughout the and any relevant actions are agreed for the year ahead. Board members, particularly newcomers, would benefit from more in-person year, all of which are reported to the Audit meetings including gatherings and site visits once travel is permitted. The 2021/22 internal evaluation covered the following areas: Committee. Composition and succession planning • Effectiveness of the Board and Committee meetings Further detail on these activities is set out in • Contr butions of the Board and its Committees • Strong sa isfac ion with the balance and diversity of the Board, with a • Increased focus given to the knowledge and skills of the Board including the Audit Committee Report on pages 100 continued desire for increasing the diversity on the Board. digital, sustainability, commercial / customer and strategy, with a view to • Relationships with the SMT around the direction and values of the to 105. The analysis of the principal risks to • Identification of skills and experience to strengthen the Board. ensuring appropriate diversity on the Board. organisation and the decision-making process the Group, the procedures for identifying • Succession planning. • The Board con inued to review succession planning and the pipeline for • Delivery of strategy against performance measures emerging risks, and how they are managed executive management. • The Board’s understanding of the Company’s journey and developing culture and mitigated are set out in the Strategic • Risk management Strategy Report on pages 50 to 57. • Succession and talent management • Visible year-on-year improvements in the quality of strategy execution and • Regular strategy execu ion and status updates were provided to the Board. status updates. • Additional updates on the Group’s competitor landscape and market The overall results of this year’s evaluation were positive and there was a • Detailed views provided in relation to areas of he strategy to be a focus for dynamics affecting the Group were provided. consensus about the challenges ahead and the areas of focus for the Board future Board meetings. • Increased attention was given to the Board’s awareness and understanding (see page 99). • Satisfaction with the Group’s approach to ESG and recogni ion that there was of the Company’s approach to digital and customer experience. a good ESG plan in place. • ESG continues to be a focus for the Board with TCFD training provided. 98 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 99 Audit Committee report # Audit Committee **Louisa Burdett** Chair ![img-2.jpeg](img-2.jpeg) ## Members Louisa Burdett (Chair) Simon Pryce Alex Baldock David Sleath ## 2021/22 highlights - Reviewed and monitored the Group's control and risk framework as the COVID-19 pandemic evolved - Reviewed the integration process for acquisitions and the effectiveness of their internal control systems - Continued its focus on development of the Group's information security strategy - Regularly reviewed the Group's progress on strengthening IT access controls and documentation of other IT controls - Monitored proposals for companies to establish an audit and assurance policy as recommended by the Brydon Review and the audit reform proposal being recommended by the UK's Department of Business, Energy & Industrial Strategy (BEIS) - Monitored the first phase of the Group's review of internal controls over financial reporting (ICFR) - Reviewed principal risks and opportunities in relation to the Task Force on Climate-related Financial Disclosures (TCFD) ## 2022/23 priorities - Continue to monitor the Group's progress in its ongoing review of ICFR - Review the Group's assessment of the impact of, and actions taken following, the regulations arising from BEIS's corporate reform - Provide additional oversight to the Group's approach to risk, including structure and metrics - Continue to review risks and opportunities for ongoing reporting of TCFD - Oversight and accounting treatment of cost / benefits of the Group's Journey to Greatness programme ## Dear shareholder As Chair of the Audit Committee (Committee), I am pleased to present the Committee's Report for the year ended 31 March 2022. The purpose of this Report is to describe the work undertaken by the Committee and explain how it has discharged its responsibilities throughout the year. The Committee's main role is to monitor and review the integrity of the Company's financial information. This includes recommending to the Board whether the Company's Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and whether the assessment of the Group's going concern assumptions and longer-term viability are reasonable. The Committee is also responsible for providing assurance to the Board that the Group's internal controls and risk management systems are fit for purpose and regularly reviewed, as well as overseeing the effectiveness and independence of the external Auditors, PricewaterhouseCoopers LLP (PwC), including recommending to the Board the approval of PwC's fees and appointment. As was the case last year, much of this year's work has been undertaken remotely due to restrictions resulting from the COVID-19 pandemic. However, restrictions in the UK were eased for part of the year in line with government guidelines with some work being able to take place locally. Communications have been maintained and we continued to see professional, comprehensive and robust work in all areas. This has meant that, throughout the year, the Committee has been able to discharge its obligations seamlessly. The Committee has continued to focus on the Group's financial reporting, including approving the disclosures in relation to geopolitical uncertainties, climate change, the continued impact of COVID-19 and the Group's going concern and viability statements, and the Group's use and definitions of alternative performance measures. The Committee has continued to focus on the key accounting matters set out on pages 102 and 103. All of these matters were conducted to the satisfaction of the Committee. The Committee has regularly reviewed and monitored the Group's progress on strengthening IT access and other controls. We are pleased that the Group has commenced a review of ICFR ahead of implementing BEIS's corporate reform. The Committee has also reviewed and considered the principal risks and opportunities in relation to the Group's obligations under TCFD, on which we are reporting for the first time. As part of its duties, the Committee has continued to review the Group's cyber security and data protection controls, further details of which can be found on page 104. The composition of the Committee changed during the year with the appointment of a new Non-Executive Director, Alex Baldock. I would like to welcome Alex to the Committee and thank him for his work with us to-date. On behalf of the Committee, I would like to thank our internal audit and finance teams and PwC for their continued support over the past year. I will be available as usual, at this year's Annual General Meeting (AGM) to answer any shareholder questions in relation to audit matters. **Louisa Burdett** Chair of the Audit Committee 24 May 2022 ## Composition of the Committee On 1 September 2021, Alex Baldock was independent Non-Executive Director to member of the Committee. There were Committee's composition. All members are independent Non-Executive Board continues to be satisfied that the current and relevant financial and account required by the provisions of the UK Code 2018 (Code). The Board is further satisfied of the Committee have sufficiently wide experience, expertise and competence responsibilities effectively. Biographies members are set out on pages 88 and 89. Meetings of the Committee are scheduled a year and occur in line with the financial the Company. Meetings are generally to so that optimum collaboration with the Members and their attendance at meetings set out on page 87. The Committee Chair extends invitation individuals to attend meetings, including other Non-Executive Directors who are Committee, the Chief Executive Officer Officer (CFO), the Company Secretary, Vice President Group Operational Audit Risk and the external Auditors, PwC, Security and Compliance Officer (CISCO) regular updates on the Group's information. The Data Protection Officer attends meeting give updates on data protection matters. The Committee has independent access and to the external Auditors without the The VP Audit and Risk and the external to the Chair of the Committee outside for The Chair provides updates to the Board considerations and findings of each member. ## Activities during the year - The core functions of the Committee in - Supporting the Board in ensuring the corporate reporting and auditing process - Assisting the Board in assessing the role of the Group by reviewing and challenging considered and severe but plausible use on the principal risks. - Advising the Board on whether the has reports present a fair, balanced and useful of the Group's position and prospects - Ensuring effective internal control and are in place. - Measuring the Group's effectiveness reviewing the risk identification process - Approving the remit of the internal audit its effectiveness and findings. - Ensuring that an appropriate relationship between the Group and its external A recommendation to the Board to approve and fees. - Monitoring progress of the Group's information to mitigate its major risks. - Reviewing the scope and effectiveness audit process. - Reviewing whistleblowing, fraud and The main activities of the Committee during the year are set out on the following page. Further information can also be found in section of our website: rsgroup.com 100 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 ## Audit Committee report continued ### Significant accounting issues and areas of judgement Management is required to exercise judgement in a number of areas when preparing the Group accounts. The Committee focuses on any significant areas of judgement that may materially impact the Group's and Company's reported results and assesses and challenges, if appropriate, whether these judgements are reasonable and appropriate. The Committee also reviews the clarity and transparency of the related disclosures. The significant accounting issues and areas of judgement considered by the Committee during the year, and how these were addressed, are set out below. | Significant accounting issues and areas of judgement | How the Committee addressed these matters and conclusions reached | | --- | --- | | **Retirement benefit obligations** The Group has a material defined benefit pension scheme in the UK and smaller defined benefit schemes in the Republic of Ireland, Germany, France and Italy. At 31 March 2022, the total net deficit in relation to these retirement benefit obligations was £12.4 million (2020/21: £35.7 million), of which the UK was £16 (2020/21: £41.2 million). Key judgements are made in relation to the assumptions used when valuing the retirement benefit obligations. See Note 10 on pages 155 to 159. | Small changes to the assumptions used to value the UK retirement benefit obligation, particularly changes in bond yields used to determine the discount rate, can have a significant impact on the financial position and results of the Group. The assumptions put forward by the actuaries, Head of Group Pensions and Group Financial Controller were reviewed by the Committee. The Committee also reviewed the external Auditors' comparisons of the assumptions with those of other similar schemes. After discussion, the Committee agreed the reasonableness of the assumptions used in valuing the retirement benefit obligations. | | **Inventories valuation** Inventories represent a material proportion of the Group's net assets. At 31 March 2022, the Group had £529.5 million (2020/21: £419.8 million) of inventories on the balance sheet. Judgements are made in estimating the net realisable value of inventories. At 31 March 2022, inventory provisions were £29.7 million (2020/21: £40.6 million). Sensitivity analysis on the assumptions was performed which indicates that any reasonably likely change in assumptions, including the continuing COVID-19 pandemic and longer-term impacts of climate change and environmental regulations, is not expected to have a material impact on the current net realisable value of inventories. See Note 18 on page 165. From an International Accounting Standard (IAS) 1 'Presentation of Financial Statements' perspective, the judgements involved in estimating the net realisable value of inventories do not have a significant risk of resulting in a material adjustment to the carrying amount of inventories within the next year. However, the Committee believes that inventories and their management are so critical to the Group's operating model that areas of judgement in inventories valuation are significant and require its particular focus. | The Group estimates the net realisable value of inventories in order to determine the value of any provision required. The judgements made in the methodology used to estimate the net realisable value relate to the number of years of sales there are in inventories of each product and the value recoverable from these inventories. These assumptions are based on recent experience and knowledge of the products on hand and are reviewed regularly. The ongoing impact of the COVID-19 pandemic and the longer-term impacts of climate change and environmental regulations on these assumptions were considered and the assumptions were adjusted where necessary to ensure they remain appropriate. The latest review was presented to the Committee and it reviewed and agreed the reasonableness of the assumptions. In order to reach these conclusions, the Committee also discussed with senior managers the inventory management process and the improvements made during the year. | | **Going concern and viability statements** As part of the Committee's responsibility to provide advice to the Board, the Committee reviewed and challenged the Group's going concern assumptions at the half year and full year and reviewed and challenged the process and assessment of the Group's longer-term viability at the full year. Management included a going concern statement in the Group's half-year report. The Committee reviewed the process conducted to prepare this statement including the assumptions used in the reverse stress tests. It recommended to the Board that it was appropriate to continue to adopt the going concern basis in the half-year results. The Committee also reviewed and agreed the wording of the going concern statement and recommended its approval to the Board. For the viability statement in the Annual Report and Accounts, the Committee reviewed the determined assessment period and reviewed and challenged the scenarios considered and severe but plausible stress testing performed on the principal risks. The Committee recommended to the Board that it is able to confirm the Group's viability statement and the going concern statement. Details of these statements can be found on pages 56 and 57 of the Strategic Report. | **Other key areas of focus** The Committee also reviews a number of other key areas that require management to exercise judgement. These judgements have not had a significant effect on the amounts recognised in the accounts in the year ended 31 March 2022 nor are they significant estimates which have a significant risk of resulting in a material adjustment to the carrying amounts of the Group's assets and liabilities within the next year. However, the Committee focuses on these areas to ensure these judgements are also reasonable and appropriate and to ensure they have not become significant. | These other key areas of focus in the year ### Other key area of focus #### Valuation The Group operates across many different periods to periodic challenges by local tax authorities during the normal course of business. The Group include transfer pricing. Judgements are made of tax contingencies required for current or future losses and areas of potential risk where laws and regulations is unclear. The Group was £9.3 million as at 31 March 2022 (2020/21). See Note 11 on pages 159 and 160. #### Impairment of goodwill and other matters There is £330.5 million of goodwill on the 31 March 2022 (2020/21) restated. £317.6 million in relation to the assumptions used in the year used to assess impairment of goodwill and other matters indicates that they may be impaired. #### Other matters - The Committee also carried out a range of financial reporting during the year which: - Reviewing the impact of amendments adopted during the year - Reviewing the measurement period and acquisition fair values of Synovos, Inc. - Reviewing and agreeing the accounting of any potential post-balance sheet events and full year During the year, the Company received the Reporting Review team of the Financials. This was to inform the Company that an Annual Report and Accounts for the year ended 31 March 2022 included in the FRC's thematic review of measures as an example of better practice. **Internal control and risk management** Reports from the VP Audit and Risk and Risk Committee and cover the performance of internal control and its effectiveness in principal risks and identifying any control. They highlight anything which might impact Group's key strategic objectives or that required in any of the Group's processes. Committee carefully considers these findings appropriate actions where necessary. An annual review of the Group's risk management is undertaken by the Committee, as required by the Guidance on Audit Committees and the FRC Guidance on Risk Management, Financial and Business Reporting. The controls which cover financial, operational and risk management systems. The output is shared with the Board. These, in combination with the Board on the Group's principal risks assess the effectiveness of the Group's and residual risk prior to making its statement and Accounts. Further information regarding risks can be found on pages 52 to 55 of the 102 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 ## Audit Committee report continued In advance of the regulations arising from BEIS's corporate reform, the Group has commenced a review of its ICFR. The first phase, which is close to being completed, was to assess the Group's current financial reporting controls and, based on risk, identify what improvements should be made. The next phases will continue during 2022/23. The goal is to improve and build on our existing financial reporting controls focused on key areas. The Committee has reviewed the first phase and is pleased with the work to date. It will continue to monitor the Group's progress. ### Internal audit The work of the internal audit function spans the whole Group including, as and when relevant, acquired businesses and provides independent and objective assurance over the Group's systems of internal controls through a risk-based approach. The Committee reviews annually and approves the scope and resourcing of the internal audit plan with the VP, Audit and Risk. The scope of the plan is determined by reference to the Group's operating risks and strategic priorities as well as perceived geographic, functional and external risks. The Committee reviews: - The level and skills of resources allocated to the internal audit function to conduct this programme of work - The summary of the results of each audit and the business team's resolution of any control issues identified - The effectiveness of the internal audit function The VP Audit and Risk has regular, open access to the Chair of the Committee via various media, including virtual and in-person meetings. Discussions focus on audit planning and matters noted during internal audit assignments. Other members of the Committee are also available as required. The Committee meets with the VP, Audit and Risk without the presence of management at least once a year. ### Other activities During the year, the Committee continued its focus on enhancing the Group's information security strategy via regular updates from the CISO. These included updates on information security risk assessments relating to our industrial control systems, including improvement actions both underway and planned. Throughout the year, the Committee also received updates on other specific information security risks and improvement actions, including strengthening IT access controls. The Committee continued with its reviews of the data protection compliance programme through reports from the Data Protection Officer and meeting with the data retention project team. The Committee continued to carry out oversight of the Group's compliance with laws regarding the protection of personal data across its operations, including the General Data Protection Regulation and the UK equivalent following Brexit. The Committee received regular reports from the Data Protection Officer highlighting ongoing compliance work such as training and awareness campaigns to embed a culture of privacy by design, as well as assessments of the impact of material changes to the Group's operations on its handling of personal data (such as significant changes to systems). The Committee also received updates on the implementation of data retention controls across the Group. The Committee received training in relation to TCFD during the year. It also discussed the principal risks and opportunities which ought to be disclosed in the Group's first TCFD report against the pillars of governance, strategy, risk management, metrics and targets. The Committee feels that it is appropriate to treat TCFD with equal importance as the Group's other reporting requirements and as such carefully assessed the contents of the TCFD report prior to its publication. The Committee was comfortable that the report contains appropriate and accurate data and information and recommended to the Board that it approve the TCFD report in parallel to this year's Annual Report and Accounts. The Committee discussed maintaining the effectiveness of internal audits during the COVID-19 pandemic and any further risk areas of focus that arise as a result. ### Auditors #### Effectiveness and independence The Committee is responsible for reviewing the performance and effectiveness of the external Auditors, PwC, as well as their appointment and remuneration. A review of the external Auditors' performance and effectiveness is undertaken by the Committee each year. The review includes looking at qualification, expertise, resources and reappointment of the external Auditors, as well as ensuring that no issues have arisen which might adversely affect their independence and objectivity. ## Audit Committee reviews of internal control and risk management ![img-3.jpeg](img-3.jpeg) 104 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 The review also considers how robust to the team, as well as the quality of delivery. The Audit Quality Inspection Report on PwC received from the Group's senior management. How well the external Auditors have examined the scepticism and whether they have provided a clear account of constructive challenge to management. The Committee and, as part of risk evaluation, the Committee also considers the risk of the audit from the market. For example, the external audit is a professional scepticism and challenge to the inventories and the measurement periods of the acquisition fair values of Synovos, and the availability assessments. During the year, the Senior Statutory Auditor, the Sandeep Dhillon, together with other related members of the PwC audit team, attended meetings and provided reports and PwC Group's key accounting judgements, including Annual Report and Accounts and half-year. Following its review, the Committee continued to recommend to the Board PwC's reappointing Auditors. The Board accepted this recommendation and resolution will therefore be put to share the forthcoming AGM to reappoint PwC. Further details of how the Committee and as well as how PwC's independence is in the corporate governance section of years' reports, the Committee can continue to not engage PwC to undertake any work in this independence. The Committee has satisfied itself that with the provisions of the Statutory Auditor Companies Market Investigation (Mandi) Processes and Audit Committee Responsibility published by the Competition and Market 26 September 2014. ### Tender and rotation Following an external tender process in as the Group's external Auditors with the 2014/15 Annual Report and Accounts. The commence a retender process for the 2024/25 Annual Report and Accounts necessary changes to providers of other orderly fashion and to appoint an auditor year as these are in the best interests of accordance with the EU Audit Regulations Companies Act 2006, which states that tender every 10 years and a change of every 20 years. No contractual obligation restrict the Committee's choice of extent. Sandeep Dhillon, Senior Statutory Auditor after the 2023/24 audit. ### Non-audit assignments undertaken The Group operates a policy to ensure non-audit services does not impair the independence or objectivity. In determining Committee look into account possible Auditors' independence and objectivity. The policy on non-audit services includes: - In providing a non-audit service, the e - Audit their own work - Make management decisions for the - Create a mutuality of interest - Find themselves in the role of advocacy Annual Report and Accounts for the year ended 31 March 2022 Nomination Committee report # Nomination Committee **Rona Fairhead** Chair ![img-4.jpeg](img-4.jpeg) ## Members Rona Fairhead (Chair) Bessie Lee David Sleath Louisa Burdett Simon Pryce Joan Wainwright ## 2021/22 highlights - Reviewed the structure, skills, knowledge, experience and diversity of the Board - Identified and nominated, for the approval of the Board, Alex Baldock to be appointed to the Board as a Non-Executive Director - Reviewed succession planning for Executive and Non-Executive Directors and the Senior Management Team (SMT) - Launched a further search process for an additional Non-Executive Director ## 2022/23 objectives - Strengthen diversity within the SMT - Increase focus on reviewing succession planning, talent and talent development ## Dear fellow shareholder This has been my first full year as Chair of the Nomination Committee (Committee) and I am pleased to present its Report for the year ended 31 March 2022. This Report details the role of the Committee and the work which it undertook during 2021/22. The Committee's responsibilities include reviewing the structure, skills, knowledge, experience and diversity of the Board; identifying and nominating, for the approval of the Board, candidates to fill vacancies; and ensuring appropriate succession planning is in place for our Board and, in compliance with the UK Corporate Governance Code 2018 (Code), the SMT. With this in mind, there were two key objectives for the Committee during the year: first, to identify a new Non-Executive Director following Bertrand Bodson's departure from the Board; and, second, to concentrate on developing enhanced succession plans for the Executive Directors and the SMT. We achieved the first of these two objectives by recommending to the Board the appointment of two new Non-Executive Directors: Alex Baldock, whom we welcomed on 1 September 2021; and Nauneet Kapoor, whom we welcome on 1 June 2022. Details of the search process undertaken with regards to Alex and Nauneet can be found in this Report. Bertrand stepped down from the Board and the Committee at the end of May 2021 and, on behalf of the Committee, I would like to take this opportunity to thank Bertrand for all his work and immense contribution during his tenure with us. The second of these two objectives is a perennial one, with the Committee seeking to ensure that there is a robust succession pipeline for our Executive Directors and our SMT. The Committee has reviewed, and will continue to work to strengthen, the Group's talent and talent development strategy as well as its diversity strategy. We will continue to strive to have the best possible individuals engaged at both Board and SMT levels to support our strategy and growth ambitions as we look to embed ourselves into the FTSE 100. I would like to thank my fellow Committee members for their hard work, commitment and support during the year. ## Rona Fairhead Chair of the Nomination Committee 24 May 2022 ## Composition of the Committee There was one change during the year to the composition of the Committee, being Bertrand Bodson who stepped down from the Board and the Committee on 31 May 2021. During the year, the Committee reviewed the balance of skills, experience and independence of Board members, including reviewing any individual Director conflict authorisations as necessary. In order to inform its view of Director independence when reviewing conflicts, consideration was also given to external appointments held by the Directors. The Committee and the Board are satisfied that, as at the date of this Report, all Non-Executive Directors are independent. The skills and experience of the Committee members are set out on pages 88 and 89. Regular attendees at meetings of the Committee have included the Chief Executive Officer (CEO), the Chief Financial Officer (CFO), the President, Group Professional Services and People and, after the latter's resignation, the Acting General Counsel and Company Secretary, and the newly appointed Chief People and Culture Officer. ## Board membership As set out in our Annual Report and Accounts for the year ended 31 March 2021, Bertrand Bodson stepped down from the Board on 31 May 2021. The Committee has therefore focused during the year on finding a suitable individual to join the Board and subsequently appointed Alex Baldock. All other Board members remain the same as in 2020/21. ## Committee evaluation As required by the Code, an internal evaluation of the performance of the Board and its Committees was undertaken in the year and was facilitated by an online questionnaire. The next external evaluation is due in 2022/23. As Alex Baldock had only just joined the Board, his feedback was not included in the evaluation process. Overall, the feedback on the Board's effectiveness was again strong, and a summary of the findings on its performance can be found on page 99. Findings on the Committee's performance were very positive, with the meetings being described as well run, business-like, open and transparent. There was a call for the Committee to do more with regards to management succession planning and to spend more time considering talent and talent development. This focus will be followed through in 2022/23. ## Succession planning Recommendations from the Committee for any new appointments, whether they be Executive Director or Non-Executive Director, are presented to the Board for its consideration. Specifications for all new Board roles are drafted to ensure that key competencies required to enhance Board composition are identified appropriately in order to assist the chosen agency when considering candidates. When considering the vacancy opened up by Bertrand Bodson's departure, the competencies identified included direct involvement in digital and cultural transformation, multi-channel experience, multinational outlook and a FTSE 100 quality candidate to match the Group's growth aspirations. After shortlisting a selection of firms, it was the first time a Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. After considering several high-quality changes, the Committee recommended the appointment of Alex Baldock as a Non-Executive Director. The Committee also undertook a search process for Non-Executive Director to join the Board and the Executive Search, which has a strong position in the Audits. Audits has no other connection with the Board, but exceptional candidates were considered to be ultimately recommended to the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. The Board has a major role in the Board. In addition to Board composition, the Committee has been to build on its work to ensure there is a strong position in the Executive Talent pipeline for the Group's SMT. This focus on talent, talent development, and content, continue throughout 2022/23. ## Employee engagement As disclosed in last year's annual report, the Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. The Committee has been appointed to consult with the Committee. Details of Board employee engagement are listed below. See also the Financial Statements for more information. Our Chair and Non-Executive Directors are responsible for the purpose of the Committee's performance. Our roles are as well as the role of the Committee in the Board. Our roles are as well as the role of the Committee in the Board. Our roles are as well as the role of the Committee in the Board. Our roles are as well as the role of the Committee in the Board. Our roles are as well as the role of the Committee in the Board. Our roles are as well as the role of the Committee in the Board. Our roles are as well as the role of the Committee in the Board. ## Diversity and inclusion As reported in previous years, diversity and inclusion were the most important importance to the Group. The Group's main aims are to maintain its Policy Statement emphasis on the Group's policy. The Group's policy is considering success and commitment at Board level. The purpose of our D&I policy remains to ensure that the Group's policy is met in accordance with the structure, development, and retention of the Group's policy. The Group's policy is to develop a culture where people feel and to share their views, opinions and talents, and to share their views and interests. The Group's policy is to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way This policy applies equally to the Board's leadership team and all of our employees and contractors. This policy applies globally and is intended to ensure that the Group's policy is met in accordance with the structure, development, and retention of the Group's policy. The Group's policy is to develop a culture where people feel and to share their views, opinions and talents, and to share their views and interests. The Group's policy is to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way We continue to commit to ensuring that the Group's policy is met in accordance with the structure, development, and retention of the Group's policy. The Group's policy is to develop a culture where people feel and to share their views, opinions and talents, and to share their views and interests. The Group's policy is to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way to be a good way • All employment, including recruitment, working conditions, and performance policies, practices and procedures are and objectively. • We have equality of opportunity for all employees with the opportunity to develop full potential. • Respect is a right – we will inspire trusts, openness. Our D&I policy can be found on our web 106 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 Corporate governance ### Directors’ remuneration report ## Remuneration ## Committee ## Simon Pryce ## Remuneration at a glance 2022 Remuneration Policy ### Chair ### 2021/22 financial performance Overview of changes J2G award • Distinctive design based on multiplier concept Like-for-like Adjusted profit Dividend Members | | | | | Current Proposed | | | successfully used before | | --- | --- | --- | --- | --- | --- | --- | --- | | | revenue growth | before tax (PBT) | per share | | | | | | Simon Pryce (Chair) Alex Baldock | | | | | | | • One-off award covering the period 2022/23 | | Louisa Burdett David Sleath | | | | | | | to 2024/25 | | | 26% | £314m | 18.0p | | Base salary | Base salary | | Joan Wainwright • 2 year post-vesting holding period 2020/21: 1% 2020/21: £182m 2020/21: 15.9p • Super stretch performance targets based Highlights of 2021/22 Pension: 10.5% on EPS and strategic delivery • Comprehensive review of the effectiveness of remuneration Pension: 18% Based on multiplier concept – multiply base LTIP policy and practice in support of strong historical Bonus: 150% 2021/22 annual incentive outcomes Financial / strategic / ESG measures award by 2 times (additional opportunity of 250%) performance, and the next phase of the Company’s Bonus: 150% multiplied by three representing each year of the ### development and Journey to Greatness (J2G) against metrics Financial / strategic measures Remuneration Policy period | • Development of specific policy proposals and incentive | | | LTIP: 250% | | | --- | --- | --- | --- | --- | | | Target | Achieved | | | | | | | TSR and EPS | 750% | frameworks to reflect best practice and support enhanced LTIP: 250% growth, improved operational performance and sustainable TSR and EPS Journey to Greatness excellent outcomes for stakeholders 500% award: 750% • Extensive shareholder engagement and consultation in Adjusted PBT EPS and strategic scorecard support of the new Remuneration Policy Shareholding guideline: 250% 128% of target achieved ROCE underpin 250% • Review and alignment of 2021/22 incentive outcomes with Company performance 10.5% 26% Shareholding guideline: 400% 0% Priorities for 2022/23 Like-for-like • Implementation of new Remuneration Policy and review of revenue growth effectiveness in supporting accelerated strategy delivery and 248% of target achieved ### excellent stakeholder outcomes Updates for J2G – stretching performance • Introduction of an environmental, social and governance ### best practice metrics aligned to strategy £114.6m £162.9m (ESG) measure into the annual bonus Committee responsibilities Adjusted free cash flow ## 70% | • Ensuring that the Directors’ Remuneration Policy remains fit | 142% of target achieved | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | 1. | 2. | 3. | 4. | 5. | | | for purpose and aligned with strategic delivery and | | | | | | | stretching EPS targets – | | | | Align | Shareholding | Introduce a | Strengthening | Introduce | set in excess of LTIP range | stakeholder outcomes | | | | pensions for | guidelines | formal post- | malus and | ESG metrics | and upper end of market | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | 50.6 | 55.7 | | | | | | | | • Reviewing reward outcomes for the Executive Directors and | | | incumbent | increased | employment | clawback | into annual | | practice in FTSE 100 the Senior Management Team (SMT) to ensure they reflect Directors to to 400% of shareholding policy bonus Group Net Promoter Score (NPS) UK employee salary policy underlying performance, as well as absolute delivery against rate aligned to 91% of target achieved ## stretch targets, as communicated to it by the Board 30% best practice • Oversight of key reward matters including Chief Executive scorecard directly aligned £245.6m £313.8m to J2G objectives (CEO) pay ratio, gender pay gap and reward outcomes relative to the wider workforce globally All eligible employees will ### 2019 Long Term Incentive Plan (LTIP) – Alignment with broader receive a £1,000 share-based ### outcome against targets: 46% employee reward award under the all employee J2G LTIP Award in 2022 Adjusted earnings Total shareholder ## per share (EPS) return (TSR) 85% 45% 4.8% All employees globally | J2G – t tching | (cumulative for the | | of employees eligible to | of eligible UK employees | Average UK employee | | | --- | --- | --- | --- | --- | --- | --- | | performan e met ics | three-year period | | | | | received a one-off bonus in | | | | 5 of 17 | participate in incentive | participate in share | salary increase will be | | | | ended 31 March 2022) | | | | | December 2021 to recognise | | | | 2018 LTIP: 9 of 32 | plans globally | ownership programmes | applied in June 2022 | | their contribution to the ## 120.3p Group’s performance 2018 LTIP: 106.0p 108 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 109 2024 LTIP2023 LTIP2022 LTIPJ2G award end ## Directors' remuneration report continued ### Dear fellow shareholder On behalf of the Remuneration Committee (Committee), I am pleased to present the Directors' Remuneration Report for the year ended 31 March 2022. Despite the continuing challenging external environment during 2021/22, the business continued to deliver exceptional outcomes for all of our stakeholders. The remuneration and incentive outcomes for the year, which are reflective of this performance, are described in the annual report on remuneration on pages 119 to 120. This year, in line with the normal three-year cycle, we will also be seeking shareholder approval for a new Remuneration Policy, which is set out on pages 113 to 118 of this Report. Further background on how the Committee developed this new Remuneration Policy, and our comprehensive engagement with shareholders on it, is set out in more detail later in this letter. ### Performance and business context As has been reported earlier in this Annual Report and Accounts, 2021/22 saw another very strong performance for the Company, growing like-for-like revenue by 26% reflecting the continued work our people have done in strengthening our position as a global omni-channel provider of industrial product and service solutions. We have grown our market share and delivered strong profit growth, despite the challenges being faced from COVID-19 and its variants, global supply chain disruptions and cost inflation. Our adjusted operating profit grew by 70% with an adjusted operating profit margin of 12.5%. Financially we remain very disciplined with return on capital employed (ROCE) of 28.7% an increase of 9.3 percentage points. We also increased our dividend by 13% to 18.0p. We have strengthened our SMT, adding expertise and experience in areas where we can widen our competitive differential further, including recruiting a Chief People and Culture Officer and a Chief Services Officer. There has been a continued evolution of the culture across the Group. We have invested in talent, empowered our leaders and incentivised our teams with stretching targets. This has been key to the exceptional Group performance and re-joining the FTSE 100 Index, over 19 years after we left. We received much external recognition of the progress we have made including winning 'company of the year' at the plc awards 2021, being voted one of the Top 50 Inclusive UK Employers 2020/21 and ranked in the top half of the FTSE 100 Rankings 2021 Women on Boards and in Leadership. Given the importance of our people, the Group ensured we continued to offer competitive pay and benefits, including implementing a competitive pay rise, increasing the number of employees participating in an incentive, introducing sustainable benefit options and an additional one-off 'thank you' bonus to all permanent employees during the year. In March 2022, the Company held an Investor Event which outlined the five key opportunities which will drive us on our Journey to Greatness to deliver stronger revenue and high-quality profitable growth. This requires: - Galvanising a high-performance, purpose-led culture - Realising a world-class customer experience - Extending our wisdom, insight and data - Accelerating to a solutions-led innovative business - Transforming our executional capabilities Successful execution of this journey will move us from a good Company to a great one and we set out on pages 21 to 25 how we plan to achieve that in detail. We also paid the remaining deficit contribution of £12.5 million into the UK defined benefit pension scheme during the year in line with the recovery plan agreed with the trustee. The first payment of £12.5 million was made in 2020/21. ### Remuneration approach for the year #### ended 31 March 2022 As set out in last year's Report, for 2021/22 we returned to a normal annual bonus plan based on performance measured over the full financial year (having used half-year targets in 2020/21 as a result of the unprecedented uncertainty during that year). The 2021/22 bonus measures were consistent with prior years, adjusted PBT, like-for-like revenue growth, adjusted free cash flow and NPS, with stretching targets set for each at the start of the year. As a result of the exceptional performance achieved during the year, those stretching targets for each of the financial measures were exceeded. While other measures of customer satisfaction improved through the year, NPS fell, largely as a result of COVID-19 and its variants and industry supply shortages. The threshold for this measure was not met. Further detail of the specific targets and the performance delivered are set out on page 123. In line with good practice and the terms of our Remuneration Policy, the Committee considered the formulaic bonus outcome of 80% of maximum in the context of the broader business performance for the year and the excellent stakeholder outcomes for all stakeholders. This review took into account the resilience of delivery given the impact of ongoing external challenges that were outside of management's direct and indirect control, as well as the overall experience of the Group's stakeholders. The Committee concluded that the formulaic outcome did not fairly reflect the exceptional overall performance of the business for the year and chose to exercise positive discretion to increase the bonus outcome for participants below Executive Director level. However, no positive discretion has been applied to the Executive Director bonuses and the overall formulaic outcome of 80% of maximum has been applied to the Executive Director bonuses. One third of the bonus will be delivered in deferred shares under the terms of the 2019 Remuneration Policy. The 2019 LTIP award, which was based on performance over the three years ended 31 March 2022, will vest at 46% of maximum based on performance against the TSR and adjusted EPS performance targets. The strong TSR performance was just below the upper quartile of the peer group, resulting in a vesting of 92% of maximum for that element. The delivery of cumulative EPS growth of 120.3p fell just below the threshold of the target range (124p), resulting in no vesting for that element. Again, the Committee reviewed this formulaic outcome and concluded that although the EPS performance achieved was exceptional, against a target range set prior to the onset of the significant disruption brought about by COVID-19, no discretionary adjustment to the vesting of the award would be made. The vested shares for the Executive Directors will be subject to a two-year holding period in line with the 2019 Remuneration Policy. Further details regarding the performance targets and how they were met are provided on page 123. ### 2022 remuneration policy In determining whether or not to make changes to the Remuneration Policy, the Committee undertook a comprehensive review over the course of the last year of the effectiveness of remuneration policy and practice in support of strong historical performance and the next phase of the Company's development. As context for this review, the Committee recognised not only the exceptional performance which the business has delivered resulting in it re-entering the FTSE 100, but also the significant opportunities which exist for stronger revenue growth, as highlighted in its Journey to Greatness. The excellent and very stretching stakeholder outcomes that Journey to Greatness has the potential to deliver are built upon continuing cultural transformation, improved operational efficiency and the effective realisation of strategic growth accelerators, all of which will drive stronger, sustained and value creative growth (as set out in detail on pages 21 to 25 of the Annual Report and Accounts). The review considered remuneration policy for first principles basis to identify and develop practices that best reflect and support opportunities to deliver for our stakeholders. The report of alternative structures that are used to be approaches we had successfully used our 2016 Remuneration Policy, under which offered the opportunity for additional to help to drive the greatest period of growth creation in our recent history. This content is a number of our major shareholders in the latest investor best-practice expected proposed Remuneration Policy change alignment and to reflect our ongoing on standards of governance. Our overall conclusion from the review is commitment to the core principles of our incentive and stakeholder outcomes in high-performance reward culture, with the levels of reward for the delivery of comprehensive levels of performance for our stakeholders, development of the Group over the last to Greatness to amplify stronger strategic and concluded that it is appropriate to make 2022 Remuneration Policy. Key features of the changes proposed, - **Recommitment to market competition** - **benchmarked to the FTSE 50-100**, increase in the size of the business was into the FTSE 100 index during the year UK-based market reference point to the 100 (the FTSE 50-100). - **Reduction in pension for incumbent** - Reflecting our prioritisation of long-term the mix of the package, we will reduce Executive Directors to the rate available by, the majority of the wider UK world - **No change to bonus or existing LTIP** - be no change to the quantum or structure plan or the base LTIP, which will remain salary, respectively. We will continue each year with the key financial and business, and so will also be based on measure for carbon-reduction in 2022 on a balance of a three-year adjusted growth rate (CAGR) and relative TSR ROCE underpin of 20%. - **Introduction of an additional Journey to Award (J2G LTIP Award)** - A small number of the Executive Directors, will participate Award, a one-off long-term incentive rewarding the next phase of our strategy profitable growth over the coming three 2025. The majority of the award (70%) achievement of exceptionally stretching targets of 15% to 21%, with the remaining successful execution of a number of performance indicators directly linked to Greatness, refer to page 114 for more discipline in capital allocation, a 20% apply to this award. The J2G LTIP Award is based on the underpinned our highly successful 2022 discussed above - it provides an opportunity long-term reward for the delivery of a targets above the top end of the LTIP, the upper end of market practice in the material changes to the 2016 structure better alignment to our current strategy we have increased the size of the multi 110 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year Directors' remuneration report continued # **Sharing success** Our high-performance, purpose-led culture will continue to be cascaded through the business, via participation in incentive plans and share schemes. 85% of our people globally participate in incentive arrangements and we are working to increase that number. The LTIP is extended to the senior management population. We will also establish an all-employee Journey to Greatness scheme under which all eligible employees will receive a share-based award of £1,000 aligned with the outcome of the main scheme described above, and will continue to consider other ways in which we can help our employees to share in our overall success. In terms of sharing success more broadly, we believe that the execution of our Journey to Greatness would have a profoundly positive impact on all of the Company's wider stakeholders, namely our people, customers, suppliers, communities and shareholders. # **Shareholder engagement** We remain committed to maintaining an open and transparent dialogue with shareholders on executive remuneration. As part of the development of the new Remuneration Policy, we engaged extensively with our major shareholders. We undertook a multi-phased consultation process, based initially on key principles and then on the detailed design, as well as the proposed targets for the J2G LTIP Award. This engagement also covered our proposals in respect of base salary increases and the exercise of positive discretion on the annual bonus. Overall, this engagement covered over 20 shareholders, who together represent around 80% of the register. We also engaged with the shareholder representative bodies and proxy agencies. The majority of the shareholders we engaged with were supportive of our proposals, including a number of our largest holders. They acknowledged the approach the Committee had taken to better align our remuneration with our high-performance, purpose-led culture and strategy, recognising that it was distinctive against others in the market. They welcomed the continued focus on long-term, share-based and performance-linked reward which the J2G LTIP Award will bring, recognising the significant value successful execution will result in for all of the Company's stakeholders. Through the consultation process, we received valuable feedback and insights from all those we spoke to, with much of this directly influencing the shape of the final proposals (for example – on the Journey to Greatness performance measures framework). The Committee firmly believes that the proposals are right for our business and its stakeholders. On behalf of the Committee, I would like to thank all those shareholders for their engagement during recent months. We will continue to engage openly with our shareholder base on the subject of executive remuneration moving forward. # **Remuneration approach for the year ending 31 March 2022** The Committee undertook the annual review of Executive Director salaries, taking into account, a range of relevant factors and revisions to the benchmark referred to earlier in this letter. Base salaries for both Executive Directors will be increased by 9% to recognise the continued strong personal performance from both Executive Directors, navigating the various external challenges and leading the business to deliver the exceptional performance. Following this market re-alignment, it is the Committee's current expectation that subsequent salary adjustments during this Remuneration Policy period will be in line with the framework we apply for the wider UK workforce, an approach we have used consistently in recent years. Other aspects of the package for the Executive Directors will reflect the new Remuneration Policy as explained earlier. Pension provision will reduce to 10.5%. The annual bonus will be based on a balanced set of key financial and strategic priorities for the year, using the following measures: adjusted PBT (35%), I ke-for-like revenue growth (35%), cash flow (10%), NPS (10%) and an ESG carbon-reduction metric (10%). The LTIP will continue to be based on TSR and adjusted EPS, with the adjusted EPS target range set at 7% to 15% compound annual growth. The J2G LTIP Award will be granted in the year and will include the exceptionally stretching adjusted EPS and strategic targets set out above. Both the LTIP and J2G LTIP awards will have a 20% ROCE underpin. Full details of the package for the year are set out on pages 119 and 121. The fee for the Chair of the Board and the base fee for the Non-Executive Directors will increase by 4.8%, in line with the average increase for our UK-based people. # **Committee changes** There were two changes to the Committee during the year, with Alex Baldock and Joan Wainwright both joining. I would like to thank all members for their significant contribution to the deliberations of the Committee during the year. # **Simon Pryce** Chair of the Remuneration Committee 24 May 2022 # Directors' R The 2022 Directors' Remuneration Policy for the year ended 31 March 2022 is subject to shareholder approval, then The key differences between the 2022 and 2022 financial year ends in the AGM held on 17 July 2019 are: - • Formalise the commitment made to the - • Introduction of the J2G LTIP Award - • Increase the level of shareholding - • Enhancement of the post-employment - • In-employment guideline for two years - • Strengthening status and clawback - • Include error in assessment, serious Further background to these changes # **Executive Director 2022 Remuneration** # **Component: Base salary** | **Objective** | To provide a broadly marketable return global talent. | | --- | --- | | **Operation** | Generally reviewed each year, include the scale and completion of overall total compensation on appropriate market data for | | **Opportunity** | There is no prescribed maximum base salary increases are a employees, changes in role Salary increases will normal | | **Performance measures** | Not applicable. | # **Component: Pension** | **Objective** | To provide a level of retirement | | --- | --- | | **Operation** | Executive Directors may par out supplement in lieu. The defined benefit section | | **Opportunity** | A maximum contribution or in circumstance to the majority of the wider UK | | **Performance measures** | Not applicable. | # **Component: Benefits** | **Objective** | To provide benefits in line with | | --- | --- | | **Operation** | Executive Directors are provi Other benefits may be provi circumstances of the individ | | **Opportunity** | While there is no prescribed and it is not currently anticip will apply. The Committee retains the allowance or in circumstance insurance costs. | | **Performance measures** | Not applicable. | # **Component: Annual bonus** | **Objective** | To focus Executive Directors focus on our longer-term bu | | --- | --- | | **Operation** | Performance targets are non Board. After the end of the fi A proportion of the total bon Share Bonus Plan (DSBP) may be payable on shares w Melus and clawback provis The Committee will operate | | **Opportunity** | The maximum opportunity in | 112 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 ## Directors' remuneration report continued ### Component: Annual bonus continued | **Performance measures** | Payment is determined by reference to performance, assessed over one financial year based on financial and strategic performance measures which the Committee considers to be aligned to the strategy and the creation of shareholder value. Such measures may include revenue, profit, cash flow, Net Promoter Score (NPS) or ESG. The performance measures for Awards to be granted in 2022/23 are as follows: • Revenue growth – 35% • Adjusted profit before tax (PBT) – 35% • Cash flow – 10% • Net Promoter Score (NPS) – 10% • ESG carbon-reduction metric – 10% | | --- | --- | | | The weightings of these performance measures are normally agreed by the Committee at the start of each year, according to annual business priorities. The overall framework will normally be weighted towards financial measures of performance. The Committee retains discretion to use different or additional measures and weightings to ensure that the bonus framework appropriately supports the business strategy and objectives for the relevant year. Before any bonus may pay out, a threshold level of adjusted PBT must be achieved. The Committee has discretion to adjust the formulaic bonus outcomes (including down to zero) to ensure alignment of pay with performance and fairness to shareholders and participants. The Committee also has the discretion to adjust targets for any exceptional events that may occur during the year. Any such discretion will be within the limits of the plan and will be fully disclosed in the relevant Annual Report on Remuneration. For threshold performance, the bonus payout will normally be nil, but in no circumstances will it exceed 10% of the maximum opportunity. For target performance, the bonus payout will be no higher than 50% of the maximum opportunity. | ### Component: LTIP | **Objective** | To link the largest part of the Executive Director's annual package with long-term business performance. Performance metrics are aligned with shareholders' interests and the holding period ensures a focus on sustainable performance. | | --- | --- | | **Operation** | An award of shares (Award) may be made annually under the Company's LTIP. Awards will be in the form of conditional shares or a nil-cost option. Awards vest after a performance period of at least three years, subject to the satisfaction of the performance measures and to continued employment with the Group. Dividend equivalents may be payable on any shares vesting and will be delivered in the form of shares. There will be a further holding period of two years following vesting. Malus and clawback provisions apply (see notes to this table). The Committee will operate the LTIP in accordance with the rules of the plan. | | **Opportunity** | The maximum LTIP award in respect of a financial year will be 250% of salary. | | **Performance measures** | Vesting is determined by reference to performance assessed over a period of at least three years, based on performance measures which the Committee considers to be aligned with the delivery of strategy and long-term shareholder value. The performance measures for Awards are determined annually and will include metrics linked to profitability, shareholder value and capital efficiency. The performance measures for Awards to be granted in 2022/23 are as follows: • Adjusted earnings per share (EPS) – 50% • Comparative total shareholder return (TSR) – 50% • A return on capital employed (ROCE) underpin. If the underpin is not met at the end of the performance period, the Committee retains the discretion to review the formulaic level of vesting and consider whether any reduction should be applied. The level of vesting for threshold performance will be no higher than 25% of maximum. Additionally, for the Award to vest, the Committee must be satisfied that there has been a sustained improvement in the Company's underlying financial performance. The Committee has discretion to adjust the formulaic LTIP outcomes if it does not reflect appropriately underlying performance over the period or is not appropriate in the context of circumstances that were unexpected or unforeseen when awards were made. The Committee also has discretion to adjust targets if it considers that an amended target is reasonable, appropriate and would not be materially more or less difficult to satisfy than when it was originally set. | ### Component: J2G LTIP Award | **Objective** | To drive and reward the delivery of exceptional profitable growth and strategic delivery over the three-year period to 31 March 2025. | | --- | --- | | **Operation** | An award of shares made under the Company's LTIP, and which will vest based on the achievement of exceptionally stretching performance targets measured over a performance period of three years to 31 March 2025. Dividend equivalents may be payable on any shares vesting and will be delivered in the form of shares. There will be a further holding period of two years following vesting. Malus and clawback provisions apply (see notes to this table). The Committee will operate this award in accordance with the rules of the LTIP. | | **Opportunity** | The maximum J2G LTIP Award which may be granted during the life of this Remuneration Policy is 750% of salary. | | **Performance measures** | Vesting is determined by reference to performance assessed over the period of three years to 31 March 2025. The performance measures for the award are as follows: • Adjusted EPS – 70% • A scorecard of KPIs directly linked to the Journey to Greatness – 30% • A ROCE underpin will also apply. If the underpin is not met at the end of the performance period, the Committee retains the discretion to review the formulaic level of vesting and consider whether any reduction should be applied. The level of vesting for threshold performance is nil. The performance targets for the award are set out on pages 120 and 121 of the Annual Report on Remuneration. Additionally, for the award to vest, the Committee must be satisfied that there has been a sustained improvement in the Company's underlying financial performance. The Committee has discretion to adjust the formulaic J2G LTIP Award outcomes if it does not appropriately reflect underlying performance over the period or is not appropriate in the context of circumstances that were unexpected or unforeseen when awards were made. The Committee also has discretion to adjust targets if it considers that an amended target is reasonable, appropriate and would not be materially more or less difficult to satisfy than when it was originally set. | ### Component: All employee share plans | **Objective** | To encourage the ownership | | --- | --- | | **Operation** | Executive Directors will be e | | **Opportunity** | Maximum opportunity will be | | **Performance measures** | Not applicable. | ### Component: Share ownership | **Objective** | To align Executive Director a | | --- | --- | | **Operation** | Executive Directors are expe | | **Operation** | Executive Director | | **Operation** | Unseated deferred share aw | | **Operation** | (basis). | | **Opportunity** | Not applicable. | | **Performance measures** | Not applicable. | ### Component: Post-employment shareholder | **Objective** | To create long-term alignme | | --- | --- | | **Operation** | after an Executive Director f | | **Operation** | Executive Directors are requ | | **Operation** | employment. | | **Operation** | The level of required shareh | | **Operation** | the date of cessation of emp | | **Operation** | The actual shareholding at c | | **Operation** | from a share award which w | | **Opportunity** | Not applicable. | | **Performance measures** | Not applicable. | ### Notes to the Remuneration Policy The Committee reserves the right to make payments and / or payments for loss of any discreditors available to it in connection with the following: notwithstanding that they are not in line with the Policy, where the terms of the payment are not applicable; before the 2022 Remuneration Policy is set out, that the terms of the payment were considered. Remuneration Policy (approved by shareholders) with section 439A of the Companies Act, 2022, was agreed; or if it is at a time when the relevant individual, Company and, in the opinion of the Company, was not in consideration for the individual, Company and, in the opinion of the Company. For these purposes, payments include awards of variable remuneration and, in the opinion of the Company, shares, the terms of the payment are agreed as if it is granted. The Committee may make minor amendments to the Policy (for regulatory, exchange control) and the purposes, or to take account of a change in the obtaining shareholder approval for that. ### Malus and clawback provisions All elements of the incentive framework of the DSBP element, LTIP and J2G LTIP, clawback provisions, which the Committee has in the circumstances which include: • misconduct or material error of the payment; • material misstatement of the Company (being the Group accounts and the Company); • an error in assessing a performance of the amount which the award was granted, vested; • serious reputational damage; • material corporate failure In such circumstances, the Committee • Require a participant to return a cash • second anniversary of payment • Reduce (including down to zero) a DS 114 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 Corporate governance ### Directors’ remuneration report continued Differences from remuneration policy 25% of the maximum award level and zero vesting under the J2G Internal promotion to the Board Both Executive Directors’ service agreements provide for base for our other people LTIP Award (reflecting the stretch of targets which are set above In cases of appointing a new Executive Director by way of internal salary in lieu of notice. The Committee will monitor, and where The remuneration policy for our other people is based on broadly those of the LTIP). promotion, the Remuneration Policy will be applied consistently to appropriate, enforce the Directors’ duty to mitigate loss. Termination consistent principles as described on pages 113 to 115. that for external appointees detailed above. Where an individual payments will also take into account any statutory entitlement at the The maximum scenario reflects fixed remuneration, plus full payout has contractual commitments made prior to their promotion to appropriate level, to be considered by the Committee on a Annual salary reviews across the Group take into account business under all incentives (150% of salary under the annual bonus, 250% Executive Director level, the Committee may choose to continue case-by-case basis. performance, local pay and market conditions, and salary levels for of salary under the LTIP and 750% of salary under the J2G LTIP to honour these arrangements. similar roles in comparable companies. The pension opportunity for Award). When the Committee believes that it is essential to protect the the Executive Directors will be aligned with the wider UK workforce Service contracts and policy for payment Company’s interests, additional arrangements may be entered into The maximum (including 50% share price growth) scenario reflects under this Remuneration Policy (for example, post-termination protections above and beyond those for loss of office fixed remuneration, plus full payout under all incentives (as in the contract of employment) on appropriate terms. The Both Executive Directors have service agreements that operate on All Executive Directors and senior managers are eligible to described above), plus 50% share price growth on the LTIP Committee may also agree to pay legal fees and outplacement a rolling 12-month basis. In line with the Committee’s policy, these participate in annual bonus schemes. 85% of our people globally and J2G LTIP awards as prescr bed by the disclosure regulations. costs or other such costs on behalf of the Directors. service agreements provide for 12 months’ notice by the Company participate in incentive plans. In line with typical market practice, Approach to Executive Director recruitment and by the Executive Directors. The Company entered into service opportunities and performance measures vary by organisational Any incentive arrangements will be dealt with subject to the relevant remuneration agreements with Lindsley Ruth on 1 April 2015 and with David Egan level, geographical region and an individual’s role. Other members rules, with any discretion exercised by the Committee on a External appointment on 1 March 2016. of the SMT are elig ble to participate in the DSBP and the LTIP on case-by-case basis taking into account the circumstances of the In cases of hiring or appointing a new Executive Director from termination. The table below summarises how awards under the similar terms. Differences apply where appropriate (e.g. in the grant The Committee’s policy for Directors’ termination payments is to outside the Group, the Committee may make use of all components various incentive arrangements are typically treated in specific levels awarded). Awards made under the LTIP are subject to provide only what would normally be due to Directors had they of remuneration set out in the Remuneration Policy table on pages circumstances. performance conditions and vest after three years subject to remained in employment in respect of the relevant notice period 113 to 118, subject to the limits contained in that table. In continued employment. Below SMT level, managers may be invited and not to go beyond their normal contractual entitlements. determining the appropriate remuneration structure and level for the to participate in the LTIP. appointee, the Committee will take into consideration all relevant | | | | | 1 | | 1 | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Good leaver | Bad leaver | | | Change of control | | All our people are elig ble to participate in the Company’s all | factors to ensure that arrangements are in the best interests of | | | | | | | | employee share plans. This includes an all employee J2G LTIP | shareholders. | Annual bonus | Bonuses are paid only to the extent that the | | No bonus is normally paid. Bonus may be paid, taking into | | | | Award under which all eligible people will be able to receive an | | | performance targets are met. Any such bonus | | | | account performance and on a | An Executive Director appointed during this Policy period may award of £1,000 based on the performance outcome in the J2G would normally be on a pro-rata basis, taking pro-rata basis. receive a J2G LTIP Award in order to align with other members of account of the period actually worked. LTIP Award. the Executive Management Team. The Committee would set any Payment would normally be made after Performance scenario charts award level with due regard to the proportion of the J2G the end of the financial year. The charts below provide estimates of the potential future reward performance period which had elapsed at the time of appointment. Any bonus will be paid without the DSBP element. opportunity for the Executive Directors, based on remuneration The Committee may also need to make an award of shares or a package for the first year of the Policy period and the potential mix DSBP Awards normally vest in full at the normal vesting Unvested awards normally lapse. Awards vest in full on the change of cash payment in respect of a new appointment to buy out between the different elements of remuneration under four different date, unless the Committee, in its discretion, decides control, unless the Committee, in remuneration arrangements or income forfeited as a result of | illustrative performance scenarios: below threshold, target, | | that awards should be time pro rated and / or should | its discretion, decides that awards | | | --- | --- | --- | --- | --- | | | leaving a previous employer, over and above the approach and | | | 2 | | | | vest on the date of cessation of employment. | should be pro-rated for time | . | maximum and maximum (including 50% share price growth). award limits outlined in the Remuneration Policy table. In | The below threshold scenario reflects fixed remuneration of base | determining an appropriate structure for any buyout awards, the | LTIP (including J2G | Unvested awards will normally continue and vest | Unvested awards normally lapse. | | Awards would vest on the change of | | --- | --- | --- | --- | --- | --- | --- | | | | LTIP award) | at the normal vesting date, based on the extent | | | control to the extent determined by | | salary, pension (18% of salary, reducing to 10.5% of salary on | Committee will consider all relevant factors including the form and | | | Vested awards remain subject to the | | | | | | | to which the performance conditions have been | | 3 | the Committee, taking into account | | 14 July 2022) and benefits (based on the amount received in | time horizon of the forfeited remuneration, any performance | | | holding period | . | | | | | | achieved. The award will be reduced pro-rata to | | | the extent to which the performance | | 2021/22). | conditions attached to the awards being bought out, and the | | | | | | | | | | take account of the proportion of the vesting period | | | conditions have been satisfied | likelihood of those conditions being met. Any such buyout will have The target scenario reflects fixed remuneration as above, plus that had elapsed (unless the Committee determines and the proportion of the vesting a fair value which, in the view of the Committee, is no greater than otherwise). period that has elapsed (unless the target bonus payout (50% of maximum), LTIP threshold vesting at the fair value of the awards forfeited. 2 Committee determines otherwise) . The Committee has discretion to determine that awards should vest earlier than the normal vesting date, in which case the Committee may determine the extent to which the performance conditions have been achieved in such manner as it considers reasonable. The award will remain subject to a | | Fixed | pro-rata adjustment. | | --- | --- | --- | | 12 806 | Annual bonus | If following cessation as a good leaver the individual | | | LTIP | agrees to start employment with another employer | before the vesting date, the Committee may J2G LTIP determine that the award will lapse. | | 28 3% | 50% share price growth | | | | | --- | --- | --- | --- | --- | --- | | Performance scenario charts (£000) | | | | | 3 | | | | | | Vested awards remain subject to the holding period | . | | | | | All employee plans | In line with the same treatment for all employees | | 9 202 under the plan rules and HMRC rules where 8 395 applicable. 1. Good leaver provisions would apply in circumstances of death, ill-health, injury or disability, the employing company ceasing to be a member of the Group or the transfer of an 28.3% undertaking to a non-group member, or any other reason that the Committee determines in its discretion. Bad leaver provisions apply under all other circumstances. 59.3% 42 7% 6 016 2. Alternatively, on a change of control, unvested share awards may be exchanged for equivalent awards of shares in a different company. In the event of a variation in capital, demerger, distribution, delisting, special dividend or other event which, in the Committee’s opinion, would materially affect the current or future value of the Company’s shares, the Committee may allow awards to vest and be released early on the same basis as for a change of control. Alternatively, in these circumstances or in the event of a variation of the Company’s share capital, the Committee may adjust the number of shares subject to an award. 3. In such circumstances, the vested awards will normally be released on the original release date, unless the Committee determines it should be released following cessation of 59.3% 42.5% employment. However, if a participant is summarily dismissed, awards will immediately lapse. 19.8% 14 0% 1 828 | | | | | | 19.8% 14.2% | External appointments | Consideration of employment conditions | | --- | --- | --- | --- | --- | --- | --- | --- | | | 24.9% | | | 1 199 | | | | | | | 11.9% 8.5% | | | | Executive Directors are permitted to take one non-executive | elsewhere in the Group | | 826 | 29.9% | | | 24 8% | | | | | | | | 544 | | 11.9% 8 5% | | | | | | | | 29 8% | | position on the board of another company, subject to the prior | The Group seeks to promote and maintain good relations with | | 100% 9.0% 6.5% | 45 2% | | | | | | | 100% 45.4% 9.0% 6 5% | | | | | | | approval of the Board. The Executive Director may retain any fees | employee representative bodies – including trades unions and | | --- | --- | --- | --- | --- | --- | --- | --- | | Below | Target Maximum Maximum | | Below | Target Maximum | Maximum | | | | | | | | | | payable in relation to such an appointment. Details of external | works councils – as part of its broader employee engagement | | threshold | | (including | threshold | | (including | | | | | | 50% share | | | 50% share | appointments and the associated fees received are included in the | strategy and consults on matters affecting employees and business | | | | price growth) | | | price growth) | Annual Report on Remuneration on page 125. | | performance as required in each case by law and regulation in Chief Executive Officer (CEO) Chief Financial Officer (CFO) 116 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 117 ## Directors' remuneration report continued the jurisdictions in which the Group operates. The Committee is mindful of the pay increases, incentive outcomes and share award participation in relevant markets across the rest of the Group when considering the remuneration of the Executive Directors. Employees have the opportunity to discuss various topics including the Executive Directors' Remuneration Policy and framework via various internal forums. ### Consideration of shareholder views The Committee consulted widely with key investors and shareholder bodies and took the feedback it received into account in developing the 2022 Remuneration Policy. This consultation exercise covered over 20 shareholders representing over 80% of the register. It remains the Committee's intention that key shareholders will normally be consulted before making any significant changes to the application of the Remuneration Policy. More broadly, the Committee considers shareholder views received during the year and at the AGM each year and is regularly kept abreast of evolving guidance from shareholders and investor bodies. The Chair of the Committee is always available to shareholders, should they wish to discuss remuneration arrangements. ### Chair and Non-Executive Director remuneration policy Non-Executive Directors do not have service agreements, but instead have letters of engagement providing for an initial three-year term. The Chair's letter of engagement and the Non-Executive Directors' letters have a three-month notice period. All Directors are subject to re-election annually at the AGM. Neither the Chair nor the Non-Executive Directors are eligible to participate in any of the Company's bonus, long-term incentive or pension plans. Details of the policy on fees paid to the Company's Non-Executive Directors are set out in the table below. ### Component: Chair and Non-Executive Director fees | **Objective** | To attract and retain Non-Executive Directors of the highest calibre with broad commercial experience relevant to the Group. | | --- | --- | | **Operation** | The fees paid to Non-Executive Directors are determined by the Board of Directors as a whole and the fee paid to the Chair is determined by the Remuneration Committee. Non-Executive Directors and the Chair receive a single base fee. Additional fees may be payable for additional Board duties, such as acting as Chair of the Audit, Nomination and Remuneration Committees, and to the Senior Independent Director. Fee levels are normally reviewed annually, with any adjustments typically made effective from 1 April. Fees are reviewed by taking into account best practice and appropriate market data including fee levels at other companies of broadly similar size, sector and international scope to RS Group plc. Time commitment and responsibility are also taken into account when reviewing fees. The Chair and the Non-Executive Directors may be provided with accommodation and travel expenses in order to carry out their duties. This may include the settlement by the Company of any associated tax liabilities in relation to these expenses. Other benefits arising from the performance of duties may be provided. | | **Opportunity** | The fees currently paid to Non-Executive Directors are disclosed in the Annual Report on Remuneration. | | **Performance measures** | Not applicable | ### Compliance with Provision 40 and 41 of the UK Corporate Governance Code The Committee considers that the executive remuneration framework appropriately addresses the factors under Provision 40 of the UK Corporate Governance Code (the Code) as set out below. As well as a focus on Executive Director remuneration, the Committee has oversight for the remuneration policies of the Group to ensure alignment with the strategic priorities of the Company. We value the contribution our people make to the success of the Group and charge management with the responsibility for ensuring a sustainable approach to their remuneration. It is important to the Committee that the Group's employees are paid at a fair level reflecting the skills they bring. We use benchmarking information to ensure we pay competitively to attract and retain talent. Part of building a sustainable Group is ensuring our employees have an opportunity to share in the success they help create. How this is achieved is outlined in the CEO Pay Ratio reporting section on page 126. We engage regularly with our employees on remuneration in general. None of our employees raised questions on executive remuneration during the year, including in our open forums, engagement surveys or our specific Board employee engagement sessions. Over the past year we have had a regular communication cadence to highlight the range of benefits available to our employees including our annual incentive, financial planning, medical, employee discounts and fleet offerings. ### Factors under Provision 40 | **Clarity** | We provide open and transparent disclosures of our Executive Directors' remuneration arrangements including undertaking engagement with key shareholders when considering changes to our Remuneration Policy. | | --- | --- | | **Simplicity** | We aim to ensure that remuneration arrangements for both our Executive Directors and the wider workforce are as simple as possible to drive understanding and engagement, and we take time to engage with participants and shareholders. | | **Predictability** | Our Remuneration Policy contains details of maximum opportunity levels for each component of pay, with actual incentive outcomes varying depending on the level of performance achieved against specific measures. | | **Proportionality, risk and alignment to culture** | The metrics used to measure performance for annual bonus and LTIP awards drive behaviours that are consistent with the business strategy and values of the organisation. The annual bonus and LTIP structures do not encourage inappropriate risk-taking. They are subject to the achievement of stretching performance targets and the Committee has the ability to apply discretion to the formulaic outcomes. Malus and clawback provisions also apply for both the annual bonus and LTIP. Annual bonus deferral, LTIP holding periods and our shareholding guidelines provide a clear link to the ongoing performance of the business and are therefore aligned with shareholder interests. | With regards to provision 41 the Remuneration Policy operated as intended in terms of Company performance and quantum. ## Annual report This part of the Report has been prepared by Companies and Groups (Account and Financial) and the Remuneration will be put to an advisory board. ### Application of the proposed 2022 **Base salary** Base salaries for the Executive Directors Lindsley Ruth David Egan In undertaking their review this year, the Committee will increasingly competitive global talent management. The committee is sustained increase in the size of the business. The UK-based market reference point to the UK's 2022 Annual Report on Remuneration is described on pages 108 and 110. Finally, the Committee has the focus on the 2022 Annual Report on Remuneration packages to be heavily funded by the UK. The Executive Directors will each receive a 2022 Annual Report on Remuneration in 108 and 110. For context, the average annual report is 108 and 110. ### Benefits Benefits will be provided in accordance with the Company's 2022 Annual Report on Remuneration compared to the prior year. ### Pension Under the new Remuneration Policy, the Committee will be responsible for the prevailing rate for the majority of the group. ### Performance-related annual bonus The maximum annual bonus opportunity for the Executive Directors will be based on the 2022 Annual Report on Remuneration. ### Performance Measure Adjusted PBT Like-for-like Group revenue growth Adjusted free cash flow Group NPS CO₂e reduction (scope 1 and 2 emissions) 1. As part of our 2030 ESG action plan – For a period of 1 January 2020, the Company will be responsible for the prevailing rate for the majority of the group. The annual bonus will be based on a base salary of £1.5 million. The maximum measures are considered commercially available. The Company will not be disclosed in advance but will not be responsible for the company's net prospectively in the annual report on the 2022 Annual Report on Remuneration. The Committee retains the discretion with the Company's performance and fairness to shareholders. Before any bonus may be paid, a three-month period will be made. The Company shall be responsible for the prevailing rate for the majority of the group. ### LTIP Lindsley Ruth and David Egan will receive a 2022 Annual Report on Remuneration in 108 and 110. The Company will be responsible for the prevailing rate for the majority of the group. The performance measures of adjusted EPS are based on the 2022 Annual Report on Remuneration in 108 and 110. The Company will not be disclosed in advance but will not be responsible for the prevailing rate for the majority of the group. 118 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 Corporate governance ### Directors’ remuneration report continued Vesting of these awards will be determined in accordance with the following performance targets measured over the three years ending The scorecard comprises the specific KPIs which will best reflect execution of the strategy in each area, with specific focus on cultural 31 March 2025. transformation, operational and growth acceleration (with financials already reflected in the EPS component). The scorecard measures each have a stretching target range, which have been robustly calibrated to represent upper quartile levels of performance for threshold Threshold Maximum and upper decile for maximum payment. The scorecard measures, weighting and rationale is: Measure Weight (25% of max) (100% of max) Weighting Measure Threshold Maximum Commentary Adjusted EPS CAGR (three-year CAGR of the 2024/25 adjusted EPS, compared with the 2021/22 | | 1 | | | Cultural transformation 7.5% Employee engagement score | | Upper | Upper | Employee engagement drives | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | adjusted EPS) | | | 50% 7% 15% | | | | | | | | | 1,2 | | | To be measured based on the | quartile | decile | positive cultural transformation, | | TSR (vs industrial / electronic peer group) | | | 50% Median Upper quartile | | | | | | | | | | | | 2024/25 Group employee engagement | | | which results in value creation | ROCE (average of 2022/23, 2023/24 and 2024/25) Underpin 20% survey outcome. and superior results. If the underpin is not met, the Committee will review Threshold and maximum equate the formulaic level of vesting and consider whether it to upper quartile and upper decile would be appropriate to use its discretion to reduce market data. the level of vesting. | | Operational efficiency 7. 5% On Time To Promise (OTTP) | | 95% 98% With more than 2,500 suppliers, | | | --- | --- | --- | --- | --- | | 1. Straight line vesting between measurement points. | | Available product delivered when expected | | over 700,000 stock products and | | 2. TSR peer group is detailed on page 124. | | in a cost effective and efficient manner. | | growing, multiple sourcing locations | | | | Performance to be measured over the | | serving multiple countries around | The awards will be subject to a post-vesting holding period of two years. three-month period ending 31 March 2025. the world, world-class OTTP for industrial high service distribution J2G LTIP Award is 98%. In accordance with the proposed 2022 Remuneration Policy, an award will be made to the Executive Directors to reward the delivery of the Growth accelerators 5.0% Web revenue 12.0% 14.5% Digital already represents 62% of Journey to Greatness, which is strongly aligned to key strategic priorities. Successful execution of the plan will deliver superior value and Increased web traffic, increasing average Group revenue and web 45%, so returns for each of our stakeholders. For more detail refer to pages 111 to 115. order value and increasing average order web revenue growth faster than frequency. Performance to be measured overall Group revenue illustrates Lindsley Ruth and David Egan will each receive a maximum award of 750% of salary. on web revenue CAGR over the three-year focused effort on lower cost to serve The awards will be determined in accordance with the following performance targets measured over the three years ending 31 March period ending 31 March 2025. revenue. Threshold CAGR is ahead 2025. In line with the underlying principles of the award, the performance targets have been set at genuinely exceptional levels of stretch. of total Group stretch growth. The EPS target range is set such that the threshold level of vesting (at which nil vests) requires growth in excess of the top end of the base LTIP range. Maximum vesting of the EPS target would broadly equate to a 2024/25 adjusted EPS of above 90p, and assuming no change 5.0% Solutions revenue 12.5% 15.5% 2021/22 solutions revenue was to multiples, would translate into shareholder value creation of around £3 billion, of which the total Journey to Greatness cost to participants To be more solutions led, solve customers’ £588.0 million. Threshold CAGR is challenges, drive value to stakeholders ahead of total Group stretch growth. would be c. 1%. For the strategic scorecard, all metrics are quantifiable and transparent, with stretching targets which broadly require upper and drive greater customer loyalty and Solutions revenue growth of this quartile levels of performance for threshold vesting and upper decile levels for maximum vesting. | | | | | | pull through products. Performance to be | | nature would represent a material | | --- | --- | --- | --- | --- | --- | --- | --- | | The awards will be subject to a post-vesting holding period of two years. | | | | | measured on solutions revenue CAGR over | | shift in our overall business position | | | | | | | the three-year period ending 31 March 2025. | | and set us up to continue to win in | | | Threshold | | Maximum | | | | the longer term. | | Measure Weight | (0% of max) | (100% of max) | | | | | | | Adjusted EPS CAGR (three-year CAGR of the 2024/25 adjusted EPS, compared with the 2021/22 | | | | 5.0% New product introduction (NPI) revenue | | 14.5% 26.0% Threshold represents a 50% | | | adjusted EPS) 70% 15% 21% | | | | | A wider product range, driven by data | | increase and maximum a doubling | | Key long term performance indicators (KPIs) scorecard (see page 121) 30% | | | | | insights to ensure it is relevant, increases | | of 2021/22 NPI revenue. NPI | | | | | | | customer loyalty and helps the Group | | revenue is considered commercially | ROCE (average of 2022/23, 2023/24 and 2024/25) Underpin 20% become their first choice. It also represents sensitive as they may reveal If the underpin is not met, the Committee will review deeper supplier relationships. A product is information that damages our the formulaic level of vesting and consider whether it included as an NPI for 12 months from its competitive advantage. Accordingly, would be appropriate to use its discretion to reduce introduction into the Group’s product range. they will not be disclosed in the level of vesting. | Once it has been in the Group’s product | advance but, to the extent the | | --- | --- | | range for a year its future revenue is not | Directors consider them to be no | | included in NPI revenue. Performance to | longer sensitive, will be disclosed | | be measured on NPI revenue CAGR over | retrospectively in the annual report | | the three-year period to 31 March 2025. | on remuneration for the relevant | year. All employee share plans Executive Directors are able to participate in any all employee share schemes offered to all employees on identical terms, with the exception that they will not participate in the all employee Journey to Greatness share award set out on pages 112 and 115. Application of Chair and Non-Executive Director Remuneration Policy for the year ending 31 March 2023 Following a review, the fees for the Chair and Non-Executive Directors will be increased by 4.8% in line with the increase awarded to strong performing UK-based employees. With effect from 1 April 2022, the Chair’s fees increased from £350,000 to £366,800 and the Non-Executive Directors’ fees were increased from £61,700 to £64,662. The additional fees for the Committee Chairs and Senior Independent Director (SID) (£15,000) and roles in respect of employee engagement (£5,000) remained unchanged. 120 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 121 Corporate governance ### Directors’ remuneration report continued Incentive outcomes for the year ended 31 March 2022 (audited) Implementation of Chair and Non-Executive Director 2019 Remuneration Policy for the year ended Annual bonus in respect of performance for the year ended 31 March 2022 31 March 2022 As set out in last year’s Report, for 2021/22 we returned to a normal annual bonus plan based on performance measured over the full Single figure for total remuneration for Non-Executive Directors (audited) financial year (having used half-year targets in 2020/21). The performance measures attached to the 2021/22 annual bonus plan were The table below sets out a single figure for the total remuneration received by each Non-Executive Director for the year ended 31 March like-for-like Group revenue growth, adjusted PBT, adjusted free cash flow and Group NPS. Targeted performance was calibrated to 2022 and the prior year: deliver a bonus of 75% of salary for the Executive Directors, with bonus payments worth up to 150% of salary for achieving stretch performance targets. Total fees Taxable Expenses 2022 2021 2022 2021 Based on the Group’s performance in 2021/22, a bonus outcome of 80% of maximum bonus was achieved. The NPS target threshold was not met. In line with good practice and the terms of our current Remuneration Policy, the Committee considered the formulaic bonus Rona Fairhead¹ £350,000 £73,333 £3,821 – outcome in the context of business performance for the year in its broadest sense. This review took into account the resilience of delivery Alex Baldock² £35,992 – £111 N/A given the impact of ongoing external challenges, as well as the overall experience of all of the Group’s stakeholders – our people, 3 Bertrand Bodson £10,283 £60,000 – – customers, suppliers, communities and shareholders. The Committee concluded that the formulaic outcome did not fairly reflect the Louisa Burdett £76,700 £70,000 £14 – exceptional overall performance of the business for the year and chose to exercise positive discretion to increase the bonus outcome for 4 Bessie Lee £65,867 £60,000 £16,671 – participants below Executive Director level. However, no positive discretion has been applied to the Executive Director bonuses and the Simon Pryce £76,700 £70,000 £27 – overall formulaic outcome of 80% of maximum has been applied to the Executive Director bonuses. The Committee considered this to be David Sleath £76,700 £78,333 – – appropriate. Further background is provided in the Strategic Report. 5 Joan Wainwright £65,867 £60,000 £28,993 – Full details of the target ranges and performance against each of the measures, are as follows: 1. Rona Fairhead was appointed to the Board on 1 November 2020 as Non-Executive Director and received the Non-Executive Director base fee until she became Chair of the Board and Nomination Committee on 1 February 2021, at which point her fee was increased to the Chair’s fee of £350,000. Performance Payout Actual Earned bonus 2. Alex Baldock was appointed to the Board on 1 September 2021. Measure and Weighting level (% of max bonus) Target performance (% of max) 3. Bertrand Bodson stepped down from the Board on 31 May 2021. Adjusted PBT (40% weighting) Threshold 0% £220.6m £313.8m 40.0% 4. Bessie Lee was appointed as Board employee engagement representative on 1 June 2021. 5. Joan Wainwright was appointed as Board employee engagement representative on 1 June 2021. Target 20% £245.6m Maximum 40% £ 25 8 .1m The Non-Executive Directors received base fees of £61,700 per annum. Fees were paid on a pro rata basis reflecting length of time in Like-for-like Group revenue growth (30% weighting) Threshold 0% 6.5% 26% 30.0% the role. David Sleath received an additional fee of £15,000 per annum for his role as SID. Louisa Burdett received an additional fee of Target 15% 10.5% £15,000 as Chair of the Audit Committee and Simon Pryce received an additional fee of £15,000 as Chair of the Remuneration Committee. Maximum 30% 12.5% Bessie Lee and Joan Wainwright each received an additional fee of £5,000 per annum for their role as the Board’s representatives on Adjusted free cash flow (10% weighting) Threshold 0% £94.6m £162.9m 10.0% employee engagement. Target 5% £114.6m Implementation of Executive Director 2019 Remuneration Policy for the year ended 31 March 2022 Maximum 10% £124.6m Single figure for total remuneration for Executive Directors (audited) Group NPS (20% weighting) Threshold 0% 54.7 50.6 0% The following table provides a single figure for total remuneration of the Executive Directors for the year ended 31 March 2022 and the prior Target 10% 55.7 year. The value of the annual bonus includes the element of bonus deferred under the DSBP, where relevant. Maximum 20% 56.7 Total bonus 80.0% Lindsley Ruth David Egan 2022 2021 2022 2021 The final bonus outcome was 80% resulting in payments for Lindsley Ruth of £801,844 and £523,796 for David Egan. The amounts will be Base salary £663,920 £642,503 £433,699 £419,709 paid as one-third deferred shares and two-thirds cash. The shares will be deferred for a period of two years in accordance with the 2019 1 Taxable benefits £17,6 67 £17,6 49 £16,161 £16,13 9 Remuneration Policy and are not subject to any non-performance conditions. Dividend equivalents will be deferred in the form of shares. 2 Pension benefit £119,506 £115,6 5 0 £78,066 £75,542 These shares have not been awarded at the date of this Annual Report on Remuneration. The number of deferred shares awarded, the Total fixed £801,093 £775,802 £527,926 £511,3 9 0 date of award and the share price used will be disclosed in the Annual Report and the Accounts for the year ending 31 March 2023. 3 | Annual bonus | | | £801,844 £778,714 £523,796 £508,687 | | | | --- | --- | --- | --- | --- | --- | | | 4,5 | | | | 2019 LTIP awards vesting | | LTI P | | | £1,374,050 £1,059,187 £753,974 £576,581 | | | | | | 6,7 | | | An award of shares was made under the LTIP in July 2019 to Lindsley Ruth over 269,959 shares and to David Egan over 148,133 shares. | | SAYE award discount | | | | – £ 7, 46 0 £7, 474 – | | These awards are subject to vesting based 50% on cumulative adjusted EPS and 50% on the Company’s relative TSR versus the Total variable £2,175,894 £1,845,361 £1,285,244 £1,085,268 industrial / electronics peer group with a ROCE underpin over the three years ended 31 March 2022. Total £2,976,987 £2,621,163 £1,813,170 £1,596,658 Performance targets, and actual performance against these, is summarised in the table below: 1. Taxable benefits consist of medical insurance, company car (or allowance) and personal fuel allowance. 2. Each of the Executive Directors received the amounts shown above as a cash supplement in lieu of pension (18% of base salary during the year and the actual amount received is Base LTIP targets provided). No Executive Director has prospective benefits under a defined benefit pension relating to qualifying service. 3. Annual bonus shows the full value of the annual bonus in respect of each year. The bonus is subject to service conditions set out on page 117. For 2021/22, the formulaic outcome Threshold Maximum Performance Vesting Measure Weight (25% of max) (100% of max) achieved (% of maximum) of the bonus was 80% of maximum, no discretion was applied. For both years, this value will be delivered as one third shares and two thirds cash. Further detail can be found on page 123 for 2021/22 and page 124 for 2020/21. Adjusted EPS (cumulative 2019/20, 2020/21, 2021/22)¹ 50% 124p 150p 120.3p 0% 4. The LT P value for 2021/22 shows the value of LTIP awards made on 18 July 2019. The plan will vest at 46% of maximum, subject to continuous employment. The value on vesting , TSR (vs industrial / electronic peer group)¹ ² 50% Median Upper quartile 5 of 17 46.0% of the LTIP performance award has been calculated using the share price of 1,057.19p, being the average share price over the three months to 31 March 2022 and will be updated in the 2022/23 Annual Remuneration Report based on the actual share price on the date of vesting. The figure includes a dividend equivalent payment of £61,221 for Lindsley Ruth ROCE (average over 2019/20, 2020/21, 2021/22) Underpin 20% 24.0% and £33,594 for David Egan in respect of the shares vesting which will be delivered in the form of shares. £635,173 of the total value for Lindsley Ruth and £348,535 of the total Total LTIP vesting 46.0% value for David Egan is in respect of the share price growth and dividends over the period since grant, based on the assumed share price of 1,057.19p. Based on the increase in the share price from the date of grant to that used in the valuation above, the increase in the share price for each share vesting was 462.19p. The proportion of the value disclosed 1. Straight-line vesting between measurement points. Vested awards will be subject to a two-year holding period. in the single figure attributable to share price appreciation is £573,952 for Lindsley Ruth and £314,941 for David Egan. The Committee did not exercise any discretion in respect of 2. TSR peer group is detailed on page 124. the share price appreciation. Further detail can be found on page 123. 5. The LT P value for 2020/21 shows the value of the LTIP awards made on 7 June 2018, which vested on 15 June 2021. The value of the LTIP award has been restated based on the share price on the date of vesting of 1,041.99p. The figure includes dividend equivalent payments of £43,195 to Lindsley Ruth and £23,514 to David Egan in respect of the shares Following the end of the performance period, the Committee considered the level of vesting in the context of the value creation for vesting. £359,559 of the total value for Lindsley Ruth and £195,730 of the total value for David Egan is in respect of the share price growth and dividends over the period between shareholders, the underlying financial performance of the Company over the performance period and considered whether any discretion grant and vesting. should be applied. The Committee considered the level of vesting to be appropriate. 6. The SAYE award discount for 2020/21 is the difference between grant date value per share and the exercise price of 573.00p. 7. The SAYE award discount for 2021/22 is the difference between grant date value per share and the exercise price of 824 00p. 122 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 123 Corporate governance ### Directors’ remuneration report continued Scheme interests awarded during the year ended 31 March 2022 (audited) Total pension entitlements (audited) DSBP Lindsley Ruth and David Egan are able to participate in the defined contribution section of the pension scheme. Under contractual During the year under review the following DSBP awards were made to Executive Directors, relating to annual bonus earned agreements, both Lindsley and David have chosen to take a cash allowance instead. Under their contracts, they were both entitled to a for performance over the year ended 31 March 2021. The shares have a two-year vesting period and are subject to two-years cash allowance of 18% of base salary, following their agreement to a reduction from 20% (effective 1 April 2020). As explained on page continuous employment. 113, the Committee has agreed that the pension rate for incumbent Executive Directors will be aligned with the prevailing rate for the majority of the wider UK workforce (currently 10.5% of salary) from 14 July 2022, in line with shareholder guidance. Executive Directors Lindsley Ruth David Egan have no prospective entitlement to a defined benefit pension by reason of qualifying service. One-third One-third Payments to past Directors (audited) Basis of award of earned bonus of earned bonus There were no payments to past Directors during the year. Number of deferred shares awarded 25,193 16,457 1 | Award date face value (1,030.33p per share) | £259,571 £169,561 | Payments for loss of office | | --- | --- | --- | | Performance conditions None None | | There were no payments for loss of office during the year. | | 1. The awards were made using the average of the share prices for the three dealing days immediately preceding 9 June 2021, the date the deferred shares were awarded. | | External appointments | The shares will be delivered in the form of restricted shares to be held for a period of two years. Lindsley Ruth was appointed non-executive director of Ashtead Group plc on 1 May 2019. His fees for this role in 2021/22 were £65,000. LTIP Percentage change in remuneration of the Directors and employees During the year under review the following LTIP awards were made to the Executive Directors: The table below shows the percentage change in the annual cash remuneration of the Directors (comprising base salary / fees, the value of taxable benefits and earned annual bonus), as disclosed in the single figure for total remuneration (tables on page 122) from the prior Lindsley Ruth David Egan year compared with the average percentage change for all UK employees of the RS Group. If the Directors did not serve a full year their Basis of award (% of base salary) 250% 250% base salary / fee is annualised. This group consists of UK-based SMT and employees. This table will be built up over time to show the Number of performance shares awarded 165,945 108,402 required five year history. 1 Award date face value (1,006.66p per share) £1,670,502 £1,091,240 The upward change in bonus reflects the strong performance of 2021/22 bonus plans across the Group and the increased participation. Performance period 1 April 2021 – 31 March 2024 Benefits provided for broader employees include medical insurance and for some employees vehicle or vehicle allowance. The Threshold vesting outcome 25% reduction in benefits for broader employees is explained by people changing vehicle selection, medical coverage levels or opting Post-vesting holding period Two year s out of the medical plan. 1. The awards were made using the average of the share prices for the three dealing days immediately preceding 24 June 2021, the date performance shares were awarded. | | The shares were awarded as performance shares, the detail of the conditions are detailed below. | Base salary / fees Taxable benefits Annual bonus | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Change | Change | Change | Change | Change | Change | | The performance conditions were as follows: | | 2021/22 | 2020/21 | 2021/22 | 2020/21 | 2021/22 | 2020/21 | Lindsley Ruth 3.2% 0% 0.1% 0% 3.0% 272.9% LTIP targets David Egan 3.2% 0% 0.1% 0% 3.0% 272.9% Threshold Maximum 1 Measure Weight (25% of max) (100% of max) Rona Fairhead 223.1% N/A N/A N/A N/A N/A 2 1 Alex Baldock N/A N/A N/A N/A N/A N/A Adjusted EPS (cumulative 2021/22, 2022/23, 2023/24) 50% 133p 158p 3 1,2 Bertrand Bodson 2.8% 0% N/A N/A N/A N/A TSR (vs industrial / electronic peer group) 50% Median Upper quartile Louisa Burdett 9.6% 0% N/A N/A N/A N/A ROCE (average over 2021/22, 2022/23, 2023/24) Underpin at 20%. 4 | If the underpin is not met, the Committee will review | Bessie Lee | | 9.8% 0% N/A N/A N/A N/A | | --- | --- | --- | --- | | the formulaic level of vesting and consider whether it | Simon Pryce 9.6% 0% N/A N/A N/A N/A | | | | would be appropriate to use its discretion to reduce | | 5 | | | | David Sleath | | (2.1)% 0% N/A N/A N/A N/A | the level of vesting. 6 Joan Wainwright 9.8% 0% N/A N/A N/A N/A 7 1. Straight-line vesting between measurement points. Karen Guerra N/A 0% N/A N/A N/A N/A 2. Comprises ABB, Arrow Electronics, Avnet, Bunzl, Datwyler, Essentra, Fastenal, Ferguson, MSC Industrial Direct, Rexel, Rockwell, Schneider, Siemens, TE Connectivity, WESCO UK-based SMT and employee population 1.92% 1.3% (6.41)% (1.5)% 17.7% 114.5% International and WW Grainger. 1. Rona Fairhead was appointed to the Board on 1 November 2020 as Non-Executive Director and received the Non-Executive Director base fee until she became Chair of the Save As You Earn (SAYE) Board and Nomination Committee on 1 February 2021, at which point her fee was increased to the Chair’s fee of £350,000. During the year under review, a SAYE award was granted to David Egan. 2 Alex Baldock was appointed to the Board on 1 September 2021. 3. Bertrand Bodson stepped down from the Board on 31 May 2021. Basis of award Savings related option 4. Bessie Lee was appointed as Board employee engagement representative on 1 June 2021. 5. David Sleath stepped down as Chair of the Nomination Committee on 31 January 2021. Number of options granted 3,640 6. Joan Wainwright was appointed as Board employee engagement representative on 1 June 2021. Grant date 10 September 2021 7. Karen Guerra stepped down from the Board on 31 December 2020. Grant date face value (1,029.33p) per share £37,4 68 Exercise price 824.00p (20% discount to grant price) Normal vesting date 1 November 2026 Normal expiration date 30 April 2027 Performance conditions None Threshold vesting income N/A 124 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 125 Directors' remuneration report continued # CEO Pay Ratio reporting | Year | Method | 25th percentile pay ratio | | Median pay ratio | | 75th percentile pay ratio | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | Total pay & benefits | Ratio | Total pay & benefits | Ratio | Total pay & benefits | Ratio | | 2022^{1} | A | £22,552 | 110:1 | £27,770 | 93:1 | £48,333 | 56:1 | | 2021 | A | £25,813 | 99:1 | £31,404 | 88:1 | £51,858 | 49:1 | | 2020 | A | £20,427 | 207:1 | £25,424 | 166:1 | £40,300 | 105:1 | 1. UK-based employee data was taken from 31 March 2022. CEO data was taken as at 31 March 2022, annual incentive and LTIP reflect the figures detailed in the 2020/21 single figure for total remuneration table. The Company adopted Option A in the regulations to calculate the pay ratios because this is considered to be the most statistically robust methodology. Under Option A the total pay and benefits has been calculated on a full-time equivalent basis to identify the 25th percentile, median and 75th percentile people. No elements of pay have been omitted from the calculation and there has been no deviation from the single figure methodology. CEO pay was consistent in the 2022 pay ratio reporting with the prior year. Following the acquisition of Needlers Holdings Limited and John Liscombe Limited and their subsidiaries in the year ended 31 March 2021, their people were included for the first time in the 2022 pay ratio calculation, the majority of whom are employed in entry level roles. This combined with a substantial increase in the bonus performance of 80.8% of maximum paid in June 2021 and the lower LTIP vesting value, has resulted in little variance year over year compared to the 2021 pay ratio reporting. It should be noted that a significant portion of CEO pay is delivered via the LTIP, the value of which is variable and linked to long-term performance targets and to the Company's share price movements over the longer term. In the 2022 pay ratio reporting, 40% of the CEO's remuneration was based on the LTIP as it vested at 74.7% of the maximum opportunity. In line with the Company's reward practices, the median pay ratio employee receives a base salary at market rates for their role and is eligible for the full range of benefits available to employees of the same level within the organisation. It is important that our people also have the opportunity to share in the success of the business that they help create. We achieved this in the 2021/22 year through: - Providing a SAYE plan to help our UK employees become business owners. - Providing a phantom share save plan in those countries outside the UK where it is legally possible to do so (which is cash settled for participants). - Providing the opportunity to 85% of our employees at all levels of the organisation to participate in an annual bonus programme. # Relative importance of spend on pay The graphs below show total dividend paid by the Company to shareholders and expenditure on total employee pay for the year and the prior year, and the percentage change year on year. Dividend (£m) 7% Total employee pay expenditure (£m) 21% The total employee pay expenditure figures above include labour exit costs set out in Note 8 on page 152. # Performance graph and table The following graph shows the 10-year period of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% of the FTSE All Share, FTSE 100 and FTSE 25.5% Total shareholder return (Value of £100 invested on 31 March 2022) ![img-5.jpeg](img-5.jpeg) Source: Datastream | CEO single figure of remuneration (£000) | Year ended 31 March 2013 | Year ended 31 March 2012 | | --- | --- | --- | | | in Males | in Males | | CEO total remuneration | 1,223 | 1,223 | | Annual bonus award (as a % of maximum opportunity) | 3.7% | 89.7% | | LTIP vesting (as a % of maximum opportunity) | 50.5% | | 1. Lindsley Ruth joined the Company in 2015 and Director shareholdings (audited) The interests of the Directors and their awards and share options and information for 2021/22, Executive Directors were Remuneration Policy, this will be increased | | Ownership | | --- | --- | | Lindsley Ruth | 972,520 | | David Egan | 370,650 | | Alex Baldock | | | Bertrand Bodson | 20,000 | | Louisa Burdett | | | Rona Fairhead | 49,970 | | Bessie Lee | | | Simon Pryce | 28,000 | | David Sleeth | 10,590 | | Joan Wainwright | | 1. The number of shares is shown as at 31 March[{"box_2d": [820, 644, 998, 672], "label": "text", "caption": "The value of the shares used to calculate the share of the shares is shown in the 2022/22 year period. The share of the shares is shown in the 2021/22 year period. The share of the shares is shown in the 2020/21 year period. The share of the shares is shown in the 2019/20 year period. The share of the shares is shown in the 2018/19 year period. 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The share of the shares is shown in the 2001/0 year period. The share of the shares is shown in the 2000/9 year period. The share of the shares is shown in the 2009/8 year period. The share of the shares is shown in the 2008/7 year period. The share of the shares is shown in the 2007/6 year period. The share of the shares is shown in the 2006/5 year period. The share of the shares is shown in the 2005/4 year period. The share of the shares is shown in the 2004/3 year period. The share of the shares is shown in the 2003/2 year period. The share of the shares is shown in the 2002/1 year period. The share of the shares is shown in the 2001/0 year period. The share of the shares is shown in the 2000/9 year period. The share of the shares is shown in the 2009/8 year period. The share of the shares is shown in the 2008/7 year period. The share of the shares is shown in the 2007/6 year period. The share of the shares is shown in the 2006/5 year period. 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The share of the shares is shown in the 2009/8 year period. The share of the shares is shown in the 2008/7 year period. The share of the shares is shown in the 2007/6 year period. The share of the shares is shown in the 2006/5 year period. The share of the shares is shown in the 2005/4 year period. The share of the shares is shown in the 2004/3 year period. The share of the shares is shown in the 2003/2 year period. The share of the shares is shown in the 2002/1 year period. The share of the shares is shown in the 2001/0 year period. The share of the shares is shown in the 2000/9 year period. The share of the shares is shown in the 2009/8 year period. The share of the shares is shown in the 2008/7 year period. The share of the shares is shown in the 2007/6 year period. The share of the shares is shown in the 2006/5 year period. The share of the shares is shown in the 2005/4 year period. The share of the shares is shown in the 2004/3 year period. 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The share of the Corporate governance ### Directors’ remuneration report continued Director’s share scheme interests (audited) Advisors Share awards Deloitte LLP was appointed by the Committee following a tender process and has provided independent advice to it since 2015. Deloitte is a founding member of the Remuneration Consultants Group and voluntarily operates under the Code of Conduct in relation to executive | | | Shares | | | | | Shares | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | awarded | Awarded | Vested | Lapsed | | awarded | Normal | remuneration consultancy in the UK (details of which can be found at www.remunerationconsultantsgroup.com). | | | Date of | at 1 April | during | during | during | at 31 March | | vesting | | | Scheme Notes | award | 2021 | the year | the year | the year | | 2022 | date | During the year Deloitte provided advice in a number of areas, including: | • Independent advice to support the Committee in setting performance targets and to develop the 2022 Remuneration Policy Lindsley Ruth LTI P 1 7 Jun 18 195,795 – 97, 50 5 98,290 – 7 Jun 21 • Support in drafting the Directors’ Remuneration Reports for the years ended 31 March 2022 and 2021 18 Jul 19 269,959 – – – 269,959 18 Jul 22 • Updates to the Committee on regulatory changes and the investor environment 19 Nov 20 195,486 – – – 195,486 4 Jun 23 24 Jun 21 – 165,945 – – 165,945 24 Jun 24 Deloitte provides advice to the Company regarding globally mobile employees but the Committee does not consider that this jeopardises DSBP 2 3 Jun 19 34,852 – 34,852 – – 3 Jun 21 the independence of Deloitte, which operates in line with the Code of Conduct described above. Deloitte’s fees for the provision of 8 Jun 20 30,216 – – – 30,216 8 Jun 22 executive remuneration consultancy services to the Committee during the year, charged on a time and materials basis, totalled £82,150. 9 Jun 21 – 25,193 – – 25,193 9 Jun 23 Executive Directors’ service contracts Total 726,308 191,138 132,357 98,290 686,799 Lindsley Ruth and David Egan entered into service contracts with the Company on 1 April 2015 and 1 March 2016 respectively. David Egan LTI P 1 7 Jun 18 106,584 – 53,078 53,506 – 7 Jun 21 These contracts have no fixed term and will continue until terminated by either party providing 12 months’ notice. 18 Jul 19 148,133 – – – 148,133 18 Jul 22 Non-Executive Directors’ letters of engagement 19 Nov 20 127,6 99 – – – 12 7, 69 9 4 Jun 23 Non-Executive Directors have letters of engagement which set out their duties and time commitment expected. Details of length of service 24 Jun 21 – 108,402 – – 108,402 24 Jun 24 are set out below: DSBP 2 3 Jun 19 22,767 – 22,767 – – 3 Jun 21 8 Jun 20 19,738 – – – 19,738 8 Jun 22 Length of service | | 9 Jun 21 – 16,457 – – 16,457 9 Jun 23 | | | | as at 31 March 2022 | | --- | --- | --- | --- | --- | --- | | Total 424,921 124,859 75,845 53,506 420,429 | | | | Date of | | | | | Name | appointment Years Months | | | 1. All awards made to the Executive Directors under the LT P are subject to performance conditions set out on page 114. The normal vesting date for the LTIP is the third anniversary Alex Baldock 1 Sep 21 0 6 of grant, the 2018 LTIP vested on 15 June 2021. Louisa Burdett 1 Feb 17 5 2 2. DSBP awards are subject to the terms set out on pages 113 and 114. Rona Fairhead 1 Nov 20 1 5 Share Options Bessie Lee 1 Mar 19 3 1 Shares Shares Simon Pryce 26 Sep 16 5 6 under option Granted Exercised Lapsed under option David Sleath 1 Jun 19 2 10 Date Vesting Expiration Exercise 1 April during during during 31 March Scheme of grant date date price 2021 the year the year the year 2022 Joan Wainwright 1 Nov 19 2 5 Lindsley Ruth SAYE 7 Sep 20 1 Nov 25 30 Apr 26 573.00p 5,235 – – – 5,235 Total 5,235 – – – 5,235 Summary of shareholder voting David Egan SAYE¹ 22 Jun 16 1 Sep 21 28 Feb 22 229.00p 13,10 0 – 13,10 0 – – Summarised below are the results at the 2019 AGM vote on the Directors’ Remuneration Policy and the 2021 AGM vote on the Directors’ Remuneration Report (excluding the part summarising the policy): SAYE² 10 Sep 21 1 Nov 26 30 Apr 27 824.00p – 3,640 – 3,640 Total 13,100 3,640 13,10 0 – 3,640 Total number % of 2019 vote on Directors’ Remuneration Policy of votes votes cast 1. David Egan exercised his SAYE options and retained the shares, the share price on the date of exercise was 1,090.00p. 2. The exercise price for the award granted during the year was calculated using the average share price on 13, 16 and 17 August 2021 and includes the 20% discount to the average For (including discretionary) 323,872,303 85.17 share price. Against 56,405,880 14.83 Total votes cast (excluding withheld votes) 380, 278,183 Remuneration Committee The task of the Committee is to consider the remuneration packages designed to promote the long-term success of the Company and Votes withheld 286,904 to ensure that Executive Directors and other senior employees are compensated appropriately for their contributions to the Group’s Total votes (including withheld votes) 380,565,087 performance. The Committee also considers the remuneration of the Company Chair. The Board as a whole considers and determines the remuneration of the Non-Executive Directors. No individual was present while decisions were made regarding their own remuneration. Total number % of 2021 vote on Directors’ Remuneration Report (excluding the part summarising the policy) of votes votes cast During the year under review, there were two changes to the Committee as Joan Wainwright was appointed to the Committee in July 2021 and Alex Baldock was appointed to the Committee in September 2021. For (including discretionary) 398,679,384 98.14 Against 7,575,272 1.86 Details of the skills and experience of the Committee members are given in their biographies on pages 88 and 89. In addition, the Total votes cast (excluding withheld votes) 406,254,656 Company Chair, CEO, CFO, other Board members, Company Secretary and SVP Professional Services and Chief People and Culture Votes withheld 149,414 Officer were invited to attend Committee meetings to advise on specific questions raised by the Committee and on matters relating to the Total votes (including withheld votes) 406,404,070 performance and remuneration of senior managers, other than in relation to their own remuneration. The Company Secretary acts as Secretary to the Committee. The Committee welcomes the support received from shareholders at the AGM for remuneration at RS Group plc. Further details of matters discussed at Committee meetings which took place during the year are available in the corporate governance Terms of Reference section of our corporate website, and attendance by individual Committee members at meetings is detailed on page 87. The Remuneration Committee responsibilities are set out in its Terms of Reference, which can be found in the corporate governance section of the Company’s website: rsgroup.com. 128 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 129 Corporate governance ### Directors’ Report Results and dividends Disclosure of information to Auditor Appointment and replacement of Directors Results for the year are set out in the Group income statement The Directors who held office at the date of approval of this Directors shall be no less than three and no more than 15 in on page 140. The Directors have declared dividends as follows: Directors’ Report each confirm that, so far as they are aware, number. The Company may by ordinary resolution increase or ## Additional there is no relevant audit information of which the Auditor is reduce the maximum or minimum number of Directors. The rules Ordinary shares unaware and that each Director has taken all the steps that they about the appointment and replacement of Directors are contained Paid interim dividend of 6.4p per share ought to have taken as Directors to make themselves aware of any in the Company’s Articles. The Articles provide that: (i) each (paid on 7 January 2022) 2020/21: 6.1p per share relevant audit information and to establish that the Auditor is aware Director shall retire at the AGM held in the third calendar year ## disclosures Proposed final dividend of 11.6p per of that information. following the year in which they were elected or last re-elected, share (to be paid on 22 July 2022) 2020/21: 9.8p per share or at such earlier AGM as the Directors may resolve; and (ii) each Conflicts of interest Total ordinary dividend of 18.0p per share Director (other than the Chair and any Director holding an executive ## The Directors present their report The Company’s Articles give the Board power to authorise for year ended 31 March 2022 2020/21: 15.9p per share office) shall retire at each AGM following the ninth anniversary of situations that might give rise to Directors’ conflicts of interest. ## and the audited financial the date on which they were elected. A retiring Director is eligible for The trustees of the Electrocomponents plc Employee Benefit Trust The Board has in place a formal conflicts of interest management re-election. The Articles further provide that the Board may appoint statements of RS Group plc have waived their right to receive dividends over their total holding procedure. The Board is responsible for considering whether any person to be a Director (so long as the total number of Directors of 315,768 ordinary shares as at 31 March 2022. authorisation is required, and if it can be given, in relation to ## (formerly Electrocomponents plc) does not exceed the limit prescribed in the Articles). Any such new situations as they arise. The Board reviews annually any Director shall hold office only until the next AGM and shall then be Share capital ## (Company) together with its conflict authorisations it has given and any limitations that have eligible for re-election. The Board has agreed that all Directors will As at 31 March 2022, the Company’s issued share capital been applied. retire and seek election or re-election at each AGM, in accordance ## subsidiary undertakings (Group) comprised a single class of 471,022,022 ordinary shares of with the UK Corporate Governance Code. 10p each, totalling £47,102,202. Important events since 31 March 2022 ## for the year ended 31 March 2022. In the period between 1 April 2022 to 24 May 2022, no important Full details of share options, awards and shares issued under Powers of the Directors events have taken place that materially impact the Group. the terms of the Company’s share incentive plans can be found Subject to the Articles, the Companies Act and any directions given in Note 9 on pages 152 to 155. by special resolution, the business of the Company will be managed Substantial shareholders by the Board, who may exercise all the powers of the Company. The Company had been advised under the Financial Conduct The Company was authorised by shareholders at the Annual The Board may exercise all the powers of the Company to borrow Authority’s Listing Rules and Disclosure Guidelines and General Meeting (AGM) held on 15 July 2021 to purchase up to 5% This section (together with the information on pages 84 to 129 money and to mortgage or charge any of its undertaking, property Transparency Rules, or had ascertained from its own analysis, of its ordinary share capital in the market. The Company did not and other information cross-referenced by this section which is and uncalled capital and to issue debentures other securities, the following shareholders held interests in the voting rights of the make use of this authority during the year. This authority will expire incorporated by reference) constitutes the Directors’ Report for whether outright or as collateral security for any debt, liability or Company’s issued share capital as at 31 March 2022 and up to the at the end of the 2022 AGM and the Company is proposing a the purposes of the Companies Act 2006 (Companies Act). obligation of the Company or of any third party. date of this Report: resolution to renew it for another year. The Directors’ Report together with the Strategic Report on pages 1 Significant agreements: change of control Number Percentage Engagement with people, customers, to 83 form the management report for the purposes of Rule 4.1.8R Shareholder of shares held The Company has a number of contractual arrangements which it suppliers and others of the Disclosure Guidance and Transparency Rules. The Company 1 considers essential to the business of the Company. Specifically, Ameriprise Financial, Inc. 74,208,207 15.75% A summary of the methods we use to engage with our people, has chosen, in accordance with the Companies Act section these are committed loan facilities from a number of banks and BlackRock, Inc. 39,520,484 8.39% customers, suppliers and our other key stakeholders, are provided 414C(11), to include the disclosure of l kely future developments in arrangements with third-party providers of administrative services. Mawer Investment Management 21,214,251 4.50% on pages 34 and 35, while details of Board engagement is provided the Strategic Report. A change of control of the Company may cause some agreements throughout the Corporate Governance Report, primarily on page 94 The Vanguard Group, Inc 18,860,825 4.00% to which the Company is a party to alter or terminate. These include and 95. The section 172(1) statement can be found on page 83 and Jupiter Investment Management Holdings 17,79 2 ,473 3.78% bank facility agreements and employee share plans, which would details of principal decisions taken by the Board during 2021/22 can Abrdn plc 16,902,684 3.59% normally vest and become exercisable on a change of control A summary of general disclosures be found on pages 92 to 94. subject to the satisfaction of any performance conditions at that 1. Ameriprise Financial, Inc. includes Threadneedle Asset Management Holdings Ltd. (incorporated in this Directors’ Report) time. The Group had committed facilities totalling £451.7 million Directors’ indemnities The following information required to be disclosed in this A full breakdown of our major shareholders ascertained by our own as at 31 March 2022 which contain clauses which require lender In accordance with the relevant provisions of the Companies Act Directors’ Report (in accordance with Listing Rule (LR) analysis is available on our corporate website. consent for any change of control. Should consent not be given, and the Company’s Articles of Association (Articles), the Company 9.8.4R and otherwise) is set out on the page numbers below: a change of control would trigger mandatory repayment of the entered into a deed in 2007 to indemnify the Directors and officers Restrictions on voting rights said facilities. (from time to time) of the Company to the extent permitted by law. A member is not entitled to vote (in person or by proxy) at any Page numbers A copy of this indemnity (which remains in force as of the date on general meeting or class meeting if either: (i) any call or other sum Amendment of Articles of Association Likely future developments 7, 18 to 25 which this Directors’ Report was approved) is available at the then payable by that member in respect of that share remains | | 1 | | | | Any amendments to the Articles of the Company may be made in | | --- | --- | --- | --- | --- | --- | | Policy on disability | | 72 | | | | | | | | registered office of the Company. | unpaid; or (ii) that member has been served with a notice after | | accordance with the provisions of the Companies Act by way of a 8, 34, 35, 39, 59, failure to provide the Company with information concerning 1 special resolution. Updated Articles were approved by shareholders Employee engagement 69 to 71, 92 to 95 The Company purchased and maintained Directors’ and Officers’ interests in those shares required to be provided under the at the AGM in 2021/22. 34, 35, 39, 58 to liability insurance throughout 2021/22, which was renewed for Companies Act. Voting rights may be exercised in person, by proxy Other stakeholder engagement 68 and 92 to 94 2022/23. Neither the indemnity nor insurance provides cover in the The Directors’ Report was approved by the Board on 24 May 2022 or, in relation to corporate members, by a corporate representative. 1 event that a Director or Officer is proved to have acted fraudulently. Greenhouse gas emissions 62 and signed on its behalf by: Proxy forms must be submitted not less than 48 hours before the Names of Directors who served during the year 88 and 89 Political contributions time of the meeting or adjourned meeting. Clare Underwood Details of employee share schemes 115, 152 to 155 In the year ended 31 March 2022, the Group made no political Company Secretary Restrictions on transfer of shares Subsidiary and associated undertakings donations or contr butions. and branches 176 to 179 The Directors may, in the case of shares in certificated form, in their AGM absolute discretion and without assigning any reason, refuse to Risk management (including hedging) and financial instruments 167 to 168 The Notice of AGM is set out in a separate circular. The AGM will be register any transfer of shares (not being fully paid shares) provided Activity on Company culture 6, 22, 23, 90 held at 12.00pm on Thursday, 14 July 2022 at Allen & Overy LLP, that such discretion may not be exercised in such a way as to One Bishops Square, London E1 6AD. This year we are offering prevent dealings in the shares of that class from taking place on an Interest capitalised by the Group 163 shareholders a choice to attend in person or remotely via a virtual open and proper basis. The Directors may also refuse to register an Long-term incentive schemes 114, 152 to 155 platform. The safety of our people, shareholders and other allotment or transfer of shares (whether fully paid or not) in favour of 1. Information required by the Large and Medium-sized Companies and stakeholders is of paramount importance to us and, although we more than four persons jointly, in which case notice of the refusal Groups (Accounts and Reports) Regulations 2008 and included in the are much better placed to deal with COVID-19, we will continue to must be sent to the allottee or transferee within two months after Strategic Report. take measures to reduce the risks associated with COVID-19. The the date on which the letter of allotment or transfer was lodged with virtual platform will enable shareholders to watch and listen to the the Company. A shareholder does not need to obtain the approval proceedings, ask questions during the meeting and vote for the of the Company, or of other shareholders in the Company, for a resolutions. Shareholders can also submit their votes in advance by transfer of shares to take place. appointing the Chair of the AGM as proxy, with voting instructions. Voting at the AGM will be on a poll. Shareholders can submit questions relating to the business of the meeting in advance to RCompanySecretarial@rsgroup.com. Further information is set out in the Notice of AGM. 130 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 131 Statement of Directors' responsibilities # Directors' responsibility statement ## Responsibility of Directors for annual report and accounts The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulation. Company law requires the Directors to prepare accounts for each financial year. Under that law the Directors have prepared the Group accounts in accordance with international accounting standards in conformity with the Companies Act 2006 and prepared in accordance with UK-adopted international accounting standards (UK IAS) and Company accounts in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102), and applicable law). Under company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group and Company for that period. In preparing the accounts, the Directors are required to: - Select suitable accounting policies and then apply them consistently; - State whether applicable UK IAS have been followed for the Group accounts and United Kingdom Accounting Standards, comprising FRS 102, have been followed for the Company accounts, subject to any material departures disclosed and explained in the accounts; - Make judgements and accounting estimates that are reasonable and prudent; and - Prepare the accounts on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group and Company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and Company and enable them to ensure that the accounts and the Directors' Remuneration Report comply with the Companies Act 2006. The Directors are also responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions. The Directors consider that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group and Company's position and performance, business model and strategy. Each of the Directors, whose names and functions are listed on pages 88 and 89 confirm that, to the best of their knowledge: - The Company accounts, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102 and applicable law), give a true and fair view of the assets, liabilities, financial position and profit of the Company; - The Group accounts, which have been prepared in accordance with UK IAS, give a true and fair view of the assets, liabilities, financial position and profit of the Group; and - The Strategic Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces. In the case of each Director in office at the date the Directors' Report is approved: - so far as the Director is aware, there is no relevant audit information of which the Group and Company's Auditors are unaware; and - they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit information and to establish that the Group and Company's Auditors are aware of that information. By order of the Board: **Lindsley Ruth** Chief Executive Officer **David Egan** Chief Financial Officer Independent Auditors' report # Independent Auditors' report to the member (formerly Elect ## Report on the audit of ### Opinion In our opinion: - RS Group plc (formerly Electrocompo - the state of the Group's and of the Co - year then ended; - the Group accounts have been prope - the Company accounts have been pro - (United Kingdom Accounting Standard - of Ireland, and applicable law); and - the accounts have been prepared in a We have audited the accounts, includes the Company balance sheets as at 31 K the Group cash flow statement, the Group accounts, which include a description of Our opinion is consistent with our report ### Basis for opinion We conducted our audit in accordance under ISAs (UK) are further described in audit evidence we have obtained is suff ### Independence We remained independent of the Group which includes the FRC's Ethical Standard responsibilities in accordance with these To the best of our knowledge and belief Other than those disclosed in Note 6 to undertakings in the period under audit. 132 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ## Independent Auditors' report continued ### Our audit approach #### Overview ##### Audit scope - • We identified 8 reporting units and used component teams in 6 countries which, in our view, required a full scope audit based on their size. - • In addition, we used component teams to perform audit procedures on specific accounts line items of 4 components, with the Group engagement team performing audit procedures on specific accounts line items of 3 components. - • The Group consolidation, accounts disclosures and a number of other items (including taxation, Group bonus accrual, goodwill, treasury, share-based payments and UK retirement benefit obligations) prepared by the head office finance function, were audited by the Group engagement team. - • The components that are part of our audit scope as set out above account for 77% of Group revenue and 84% of Group profit before tax, substantial reorganisation costs, substantial asset write-downs and acquisition-related items. - • This year we have also specifically set out our consideration of the impact of climate change on the audit which is further explained below. The Group explains the impact of climate change on its business within the TCFD section of the Strategic Report. In planning and executing our audit we have considered the Group's climate risk assessment process and this, together with discussions with our own climate change experts, provided us with a good understanding of the potential impact of climate change on the accounts. Management has assessed that the most likely impacted accounts line items and estimates are those associated with future cash flows since the impact of climate change is expected to become more notable in the medium to long term. While auditing these forecast cash flows, we have challenged management on reflecting the impact of climate change and any climate change related commitments in the forecasts. We have not identified any matters as part of this work which are inconsistent the disclosures in the Annual Report or lead to any material adjustments to the accounts. ##### Key audit matters - • Inventory obsolescence provision (Group) - • Defined benefit pension scheme liabilities (Group) - • Tax provisioning (Group) - • Carrying value of investments (Company) ##### Materiality - • Overall Group materiality: £15.00 million (2020/21: £9.70 million) based on approximately 5% of Group profit before tax, substantial reorganisation costs, substantial asset write-downs and acquisition-related items. - • Overall Company materiality: £4.49 million (2020/21: £4.50 million) based on approximately 0.5% of net assets. - • Performance materiality: £11.25 million (2020/21: £7.28 million) (Group) and £3.36 million (2020/21: £3.38 million) (Company). #### The scope of our audit As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the accounts. #### Key audit matters Key audit matters are those matters that, in the auditors' professional judgement, were of most significance in the audit of the accounts of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the accounts as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. 'Carrying value of investments' is a new key audit matter this year. 'Fair value of acquired intangibles' and 'impact of COVID-19 pandemic', which were key audit matters last year, are no longer included because there have been no new acquisitions during the year and the impact of the COVID-19 pandemic is now better understood and managed. Otherwise, the key audit matters below are consistent with last year. ##### Key audit matter ##### Inventory obsolescence provision (Group) Refer to page 102 (Audit Committee Report), page 144 (Note 1 Basis of preparation) and page 165 (Note 18 inventories). The balance of gross inventories at 31 March 2022 was £559.2 million (2020/21: £460.4 million), against which a provision of £29.7 million (2020/21: £40.6 million) was held. The Group's business model is based on having the broadest range in the industry and delivering products on time, often the next day. This results in large quantities of inventory comprising many different types of product, being held for long periods of time which raises the risk of inventory obsolescence. The inventory provision is calculated on an inventory cover basis with the underlying calculation based on appropriate product categorisation and assumptions over historic sales trends, provision rates and recoverable amounts. The inventory provision is calculated within the Group's accounting systems using an automated process. Where necessary, manual overlays are applied to this provision to account for unusual circumstances that may have arisen during the year or where there is a right of return in place. ##### How our audit addressed the key audit matter For the year-end inventory provision, we assessed the completeness of the data used by the Group's accounting system to calculate the provision by agreeing the sub-ledger to the general ledger. We recalculated the provision to ensure mathematical accuracy and consistency of application with the methodology. We noted no material exceptions. We assessed the reasonableness of management's estimates regarding the future annual sales and the obsolescence percentage applied by comparing these assumptions to historical sales and historical write-offs. We found the assumptions to be reasonable. We tested manual overlays to the automated calculation by validating the circumstances relating to the adjustments or whether there was a right of return under the contractual arrangements. We noted no material exceptions. In assessing management's consideration of the estimation uncertainty within the inventory obsolescence provisioning, we reviewed management's sensitivity assessment which considered an increase in inventory cover days and provisioning rates. Based on our review, we did not disagree with management's conclusions that based on the information available at the time of the Board's approval of the accounts, such sensitivities would not result in a material change to the inventory provision. ##### Defined benefit pension scheme liabilities Refer to page 102 (Audit Committee Report), Basis of preparation) and pages 155 to 159 (benefit obligations). The Group has net retirement benefit obligations at 31 March 2022 (2020/21: £55.7 million), with the context of the overall balance sheet. The net retirement benefit obligations in respect of a 6.4% (2020/21: £41.2 million). This is after the ceiling to the scheme surplus of £24.9 million having an unconditional right to the surplus to the scheme. The £12.4 million is made up of immaterial a European defined benefit pension and retirement schemes. The valuation of pension plan liabilities required to be determined by determining appropriate assumptions such as mortality rates, discount rates and inflation for these assumptions can have a material impact of the liabilities. Management uses external audit to determine these assumptions. ##### Tax Provisioning (Group) Refer to page 103 (Audit Committee Report), Basis of preparation) and pages 159 and 160. Due to the Group operating across a number of jurisdictions it is subjected to periodic challenges, authorities on a range of tax matters during business. These challenges include transactions and financing and transfer pricing arrangements, centralised functions that drive value across different countries. The Group continues to provide for uncertainty respect of transfer pricing and other matters based on the estimates of the potential outcome authorities in jurisdictions in which the Group E8.3 million (2020/21 restated: £7.8 million). ##### Carrying value of investments (Company) Refer to page 183 (Note 8 investments in subsidiaries and Company accounts). The Company holds investments in subsidiaries and Company accounts for 343.0 million at 31 March 2022 (2020/21: £3.4 million). Investments in subsidiaries are accounted for for impairment in the Company balance sheet, tested for impairment if impairment indicators exist, the recoverable amounts of subsidiaries are estimated in order to determine impairment loss, if any. Any such impairment in the profit and loss account. 134 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 ## Independent Auditors' report continued ### How we tailored the audit scope We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the accounts as a whole, taking into account the structure of the Group and the Company, the accounting processes and controls, and the industry in which they operate. The Group's accounting process is structured around a local finance function in most of the Group's country reporting units. These functions maintain their own accounting records and controls (although transactional processing and certain controls for many reporting units are performed at the Group's EMEA, Americas and Asia Pacific centres of expertise) and report to the head office finance team through an integrated consolidation system. In establishing the overall approach to the Group audit, we determined that we needed to conduct audit work over the complete financial information of RS UK, RS Germany, RS France, RS Italy, RS Shanghai, Allied Electronics, Inc., Allied Electronics (Canada), Inc., and RS Group plc (formerly known as Electrocomponents plc). In each country we used PwC component auditors to audit and report on the aggregated financial information of that component. This work is supplemented by audit procedures over specific balances performed on IESA Limited, Needlers Limited, Bodenfeld Immobilien GmbH, Synovos, Inc., Synovos Singapore Pte. Ltd., RS Australia and RS Hong Kong and procedures performed centrally on the Group consolidation, accounts disclosures, taxation, Group bonus accrual, goodwill, treasury, share-based payments, UK retirement benefit obligations, acquisition accounting and certain component balances not covered by local country component teams. Where the work was performed by component auditors, under our instruction, we determined the level of involvement we needed to have in the audit work at those reporting units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group accounts as a whole. We maintained regular communication with the local teams, before, during and after their audit. We directed the work of component teams, reviewed their approach and findings, and participated in the closing meetings of the significant and material components. The components that are part of our audit scope as set out above account for 77% of Group revenue and 84% of Group profit before tax, substantial reorganisation costs, substantial asset write-downs and acquisition-related items. ### Materiality The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual accounts line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the accounts as a whole. Based on our professional judgement, we determined materiality for the accounts as a whole as follows: | | Accounts – Group | Accounts – Company | | --- | --- | --- | | **Overall materiality** | £15.00 million (2020/21: £9.70 million) | £4.49 million (2020/21: £4.50 million) | | **How we determined it** | Approximately 5% of Group profit before tax, substantial reorganisation costs, substantial asset write-downs and acquisition-related items | Approximately 0.5% of net assets | | **Rationale for benchmark applied** | We believe that profit before tax adjusted for one-off items is the key measure used by the shareholders as a body in assessing the Group's performance. We consider that excluding the substantial reorganisation costs, substantial asset write-downs and acquisition-related items is appropriate as this provides us with a consistent year-on-year basis for determining materiality by eliminating the non-recurring impact of these items. | We believe that net assets is the primary measure used by the shareholders in assessing the performance and position of the entity as it reflects the Company's principal activity as a holding company and is a generally accepted auditing benchmark. | For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of materiality allocated across components was between £1.0 million and £5.4 million. Certain components were audited to a local statutory audit materiality that was also less than our overall Group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2020/21: 75%) of overall materiality, amounting to £11.25 million (2020/21: £7.28 million) for the Group accounts and £3.36 million (2020/21: £3.38 million) for the Company accounts. In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our normal range was appropriate. 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able to conduct audit, and we are able to conduct audit, and we are able to conduct audit, and we are able to conduct audit, and we are able to conduct audit, and we are able to conduct audit, and we are able to conduct audit, and we are able to conduct audit, and we are In auditing the accounts, we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have conducted the accounts as a whole, and we have However, because not all future events are not a good account, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are In relation to the Directors' reporting on the accounts as a whole, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are Our responsibilities and the responsibilities of the Company's audit, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are ### Reporting on other information The other information comprises all of the Directors' accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are In connection with our audit of the accounts as a whole, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are With respect to the Strategic Report and the Company's audit, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are Based on our work undertaken in the accounts as a whole, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are ### Strategic Report and Directors' accounts as a whole In our opinion, based on the work undertaken in the accounts as a whole, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are In light of the knowledge and understanding of the accounts as a whole, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are ### Directors' Remuneration In our opinion, the part of the Directors' accounts as a whole, we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are able to conduct the accounts as a whole, and we are 136 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 ## Independent Auditors' report continued ### Corporate governance statement The Listing Rules require us to review the Directors' statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the Company's compliance with the provisions of the UK Corporate Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement, included within the Corporate Governance Report, is materially consistent with the accounts and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: - • The Directors' confirmation that they have carried out a robust assessment of the emerging and principal risks; - • The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; - • The Directors' statement in the accounts about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the Group's and Company's ability to continue to do so over a period of at least twelve months from the date of approval of the accounts; - • The Directors' explanation as to their assessment of the Group's and Company's prospects, the period this assessment covers and why the period is appropriate; and - • The Directors' statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions. Our review of the Directors' statement regarding the longer-term viability of the Group was substantially less in scope than an audit and only consisted of making inquiries and considering the Directors' process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the accounts and our knowledge and understanding of the Group and Company and their environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the accounts and our knowledge obtained during the audit: - • The Directors' statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the Group's and Company's position, performance, business model and strategy; - • The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and - • The section of the Annual Report describing the work of the Audit Committee. We have nothing to report in respect of our responsibility to report when the Directors' statement relating to the Company's compliance with the UK Corporate Governance Code does not properly disclose a departure from a relevant provision of the UK Corporate Governance Code specified under the Listing Rules for review by the auditors. ### Responsibilities for the accounts and the audit #### Responsibilities of the Directors for the accounts As explained more fully in the Statement of Directors' Responsibilities, the Directors are responsible for the preparation of the accounts in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of accounts that are free from material misstatement, whether due to fraud or error. In preparing the accounts, the Directors are responsible for assessing the Group's and the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so. #### Auditors' responsibilities for the audit of the accounts Our objectives are to obtain reasonable assurance about whether the accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these accounts. Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws and regulations related to Listing Rules of the Financial Conduct Authority (FCA), pensions legislations, UK and other relevant tax legislation, and we considered the extent to which non-compliance might have a material effect on the accounts. We also considered those laws and regulations that have a direct impact on the accounts such as the Companies Act 2006. We evaluated management's incentives and opportunities for fraudulent manipulation of the accounts (including the risk of override of controls), and determined that the principal risks were related to posting inappropriate journal entries to manipulate financial results and management bias in accounting estimates. The Group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group engagement team and/or component auditors included: - • discussions with management, legal counsel and the internal audit function, including consideration of known or suspected instances of non-compliance with laws and regulations and fraud; - • assessment of matters reported on the Group's whistleblowing helpline and results of management's investigation of such matters; - • challenging assumptions made by management in its significant and other key accounting estimates in particular in relation to defined benefit pension scheme liabilities, inventory obsolescence provisions and uncertain tax positions; and - • identifying and testing higher risk journal entries, in particular any journal entries posted with unusual account combinations, journals posted by senior management, or unauthorised users or super-user access and consolidation journals. There are inherent limitations in the audit with laws and regulations that are not a material misstatement due to fraud is the concealment by, for example, forgery or Our audit testing might include testing of However, it typically involves selecting a target particular items for testing based a conclusion about the population from A further description of our responsibility www.frc.org.uk/auditoresponsibilities #### Use of this report This report, including the opinions, has Part 16 of the Companies Act 2006 and other purpose or to any other person to prior consent in writing. ### Other required report #### Companies Act 2006 exceptions - • Under the Companies Act 2006 we are - • we have not obtained all the information - • adequate accounting records have no branches not visited by us; or - • certain disclosures of Directors' remuneration - • the Company accounts and the part of records and returns. We have no exceptions to report arising #### Appointment Following the recommendation of the A year ended 31 March 2015 and subsequent ended 31 March 2015 to 31 March 2022 ### Other matter As required by the Financial Conduct A ESF-prepared annual financial report ESF Regulatory Technical Standard has been prepared using the single ele #### Sandeep Dhillon (Senior Statuto for and on behalf of PricewaterhouseCo Chartered Accountants and Statutory A London 24 May 2022 138 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year Financial statements ### Group accounts ## Group income statement Group balance sheet ## For the year ended 31 March 2022 As at 31 March 2022 Company number: 647788 | | 2022 | 2021 | | | | | --- | --- | --- | --- | --- | --- | | | | | 2022 | 2021 | | | Notes | £m | £m | | | 1 | restated | Revenue 2,3,5 2 ,553.7 2,0 02.7 | | | | Notes | | £m | £m | | --- | --- | --- | --- | --- | --- | --- | --- | | Cost of sales 6 (1,425.8) (1,146.7) | | | Non-current assets | | | | | | Gross profit | 1,127. 9 856.0 | | Intangible assets 14 47 3.3 466. 4 | | | | | | Distribu ion and marketing expenses (755. 6) (630.1) | | | Property, plant and equipment 15 | | 177.3 170.2 | | | | dministra ive expenses (63.5) (58.7) | | | Right-of-use assets 16 | | 45.8 58.6 | | | | Operating profit 2,3,6 | 308.8 167.2 | | Investment in joint venture 17 | | | 1.5 1.1 | | | Finance income 7 1.0 1.8 | | | Other receivables 19 | | | 3.0 2.9 | | | Finance costs 7 | | (8.1) (8.6) | Interest rate swaps 22 | | | – 1.1 | | | Share of profit of joint venture 17 | | 0.5 0.2 | Retirement benefit net assets 10 | | | 0.3 0.8 | | | Profit before tax | 302.2 160.6 | | Deferred tax assets 11 | | | 4.9 9.9 | | | Income tax expense 11 (72.2) (35.1) | | | Total non-current assets | | 706.1 711.0 | | | | Profit for the year attributable to owners of the Company | 230.0 125.5 | | Current assets | | | | | Inventories 18 52 9.5 419. 8 | Earnings per share | | Trade and other receivables 19 | 594.3 493.6 | | --- | --- | --- | --- | | Basic 12 | 48.9p 27.7p | Cash and cash equivalents – cash and short-term deposits 22 | 257.9 197.9 | | Diluted 12 | 48.6p 27.5p | Interest rate swaps 22 | 0.1 – | | | | Other derivative assets 21 | 1.4 2.2 | | | | Current income tax receivables | 11.9 21.3 | | | | Total current assets | 1,395. 1 1,134.8 | Total assets 2,101.2 1,8 45.8 Current liabilities ## Group statement of Trade and other payables 20 (5 84.1) (475.3) Cash and cash equivalents – bank overdrafts 22 (99.5) (111.5) ## comprehensive income Other borrowings 22 – (0.7) Lease liabili ies 16,22 (16.7) (17.4) ## For the year ended 31 March 2022 | | | | | Interest rate swaps 22 | (0.2) – | | --- | --- | --- | --- | --- | --- | | | | | | Other deriva ive liabilities 21 | (3.2) (2.0) | | | | 2022 | 2021 | | | | | Notes | £m | £m | Provisions 24 | (2.6) (4.9) | | Profit for the year 230. 0 125.5 | | | | Current income tax liabilities | (19.9) (20.0) | | | | | | Total current liabilities | (726.2) (631. 8) | | Other comprehensive income | | | | Non-current liabilities | | | Items that will not be reclassified subsequently to the income statement | | | | Other payables 20 (6.9) (6.8) | | | Remeasurement of retirement benefit obligations 10 | | 21.8 (22.5) | | Retirement benefit obliga ions 10 | (12.7) (56.5) | | Income tax on items that will not be reclassified to the income statement 11 | | (0.9) 4.3 | | Borrowings 22 | (151.7) (147. 3) | | | | 20.9 (18.2) | | Lease liabili ies 16,22 | (32.0) (44.1) | | | | | | Provisions 24 | (2.8) (2.0) | | Items that may be reclassified subsequently to the income statement | | | | Deferred tax liabili ies 11 | (60.4) (57.9) | | Foreign exchange transla ion differences of joint venture | | 0.1 (0. 1) | | Total non-current liabilities | (266.5) (314. 6) | | Foreign exchange translation differences | | 21.8 (42.4) | | Total liabilities (992. 7) (9 46.4) | | | Movement in cash flow hedges | | 1.4 (4. 5) | | Net assets 1,108. 5 899.4 | | | Income tax on items that may be reclassified to the income statement 11 | | (0.3) 1.0 | | Equity | | | | | 23.0 (46.0) | | Share capital 25 47. 1 47.0 | | | Other comprehensive income / (expense) for the year 43.9 (64.2) | | | | Share premium account 25 | 231.4 228.5 | | Total comprehensive income for the year attributable to owners of the Company 273.9 61.3 | | | | Hedging reserve | (0.7) (1.4) | | | | | | Own shares held by Employee Benefit Trust (EBT) 25 | (3.0) (1.5) | The Notes on pages 144 to 179 form part of these Group accounts. | Cumula ive translation reserve | | 60.9 39.0 | | --- | --- | --- | | Retained earnings | | 772.8 587.8 | | Equity attributable to owners of the Company | 1,108. 5 899.4 | | 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). The Notes on pages 144 to 179 form part of these Group accounts. These Group accounts were approved by the Board of Directors on 24 May 2022 and signed on its behalf by: David Egan Chief Financial Officer 140 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 141 A Financial statements ### Group accounts continued | Group cash flow statement | | | | Group statement of changes in equity | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | For the year ended 31 March 2022 | | | | For the year ended 31 March 2022 | | | | | | | | | | | | | | | | 2022 | 2021 | | | Share | | | | | Cumulative | | | | | | | | Notes | £m | £m | | Share | premium | Hedging | | Own shares | | translation | | | Retained | | | | | | | | | capital | account | reserve | | held by EBT | | | reserve | | earnings | | Total | | Cash flows from operating activities | | | | | £m | £m | | £m | | £m | | | £m | | £m | £m | | Profit before tax 302.2 160. 6 | | | | At 1 April 2020 44.6 51.4 – (0.7) 81.5 543.1 719.9 | | | | | | | | | | | | | | Depreciation and amortisation 2 | | 63.7 5 6.5 | | | | | | | | | | | | | | | Profit for the year – – – – – 125 5 125.5 Loss on disposal of non-current assets 2.4 0.3 Remeasurement of re irement benefit obligations – – – – – (22.5) (22 .5) Equity-set led share-based payments 8,9 9.9 7.0 Foreign exchange translation differences – – – – (44.7) – (44.7) Net finance costs 7.1 6.8 Fair value gain on net investment hedges – – – – 2.2 – 2.2 Share of profit of and dividends received from joint venture 17 (0.3) (0.2) Cash flow hedging losses taken to equity – – (3.2) – – – (3.2) Increase in inventories (102.1) (4. 4) Cash flow hedging gains transferred to income statement – – (1.4) – – – (1.4) Increase in trade and o her receivables (96.5) (32.6) Cash flow hedging losses transferred to administrative expenses Increase in trade and o her payables and retirement benefit obliga ions 82.4 3 5.5 as hedged future cash flows no longer expected to occur – – 0.1 – – – 0.1 (Decrease) / increase in provisions (1.7) 1.6 Tax on other comprehensive income (Note 11) – – 1.0 – – 4 3 5.3 Cash generated from operations 267.1 231.1 Total comprehensive (expense) / income – – (3.5) – (42.5) 107 3 61.3 Interest received 1.0 1.8 Cash flow hedging losses transferred to inventories – – 2.7 – – – 2.7 Interest paid (8.0) (10.1) Tax on cash flow hedging losses transferred to inventories – – (0.6) – – – (0.6) Income tax paid (57.1) (35.2) Dividends (Note 13) – – – – – (71.2) (7 1.2) Net cash from operating activities 203.0 187.6 Equity-settled share-based payments (Notes 8 and 9) – – – – – 7 0 7.0 Share placing, net of transaction costs (Note 25) 2.2 173 9 – – – – 176.1 | Cash flows from investing activities | | | Set lement of share awards (Note 25) 0.2 3 2 – 0 8 – (0.8) 3.4 | | | | --- | --- | --- | --- | --- | --- | | cquisi ion of businesses 28 2.2 (1 57.5) | | | Purchase of own shares by EBT – – – (1.6) – – (1.6) | | | | Cash and cash equivalents acquired wi h businesses | | – 22.0 | Tax on equity-settled share-based payments – – – – – 2.4 2.4 | | | | ggregate of cash paid to acquire and cash and cash equivalents acquired wi h businesses 2.2 (135.5) | | | At 31 March 2021 47.0 228 5 (1.4) (1. 5) 39. 0 587 8 899.4 | | | | Purchase of intangible assets, property, plant and equipment (42.5) (54.7) | | | Profit for the year – – – – – 230 0 2 30.0 | | | | Net cash used in investing activities | (40.3) (190.2) | | Remeasurement of re irement benefit obligations – – – – – 21 8 21.8 | | | | | | | Foreign exchange translation differences | | – – – – 22.0 – 2 2.0 | | Cash flows from financing activities | | | Fair value loss on net investment hedges | | – – – – (0.1) – (0.1) | | Proceeds from the issue of share capital | 3.0 179.5 | | Cash flow hedging losses taken to equity | | – – (1.2) – – – (1.2) | | Purchase of own shares by EBT | (2.9) (1.6) | | Cash flow hedging losses transferred to income statement | | – – 2.6 – – – 2.6 | | Loans repaid | (0.7) (24.3) | | Tax on other comprehensive income (Note 11) | | – – (0.3) – – (0.9) (1.2) | | Payment of lease liabilities | (17.8) (16.4) | | Total comprehensive income | | – – 1.1 – 21.9 250 9 2 73.9 | | Dividends paid 13 | (76.2) (71.2) | | Cash flow hedging gains transferred to inventories – – (0.5) – – – (0.5) | | | | Net cash (used in) / generated from financing activities | (94.6) 66.0 | | Tax on cash flow hedging gains transferred to inventories | | – – 0.1 – – – 0.1 | | | | | Dividends (Note 13) | | – – – – – (76.2) (76.2) | | Net increase in cash and cash equivalents 68.1 63.4 | | | Equity-set led share-based payments (Notes 8 and 9) | | – – – – – 9 9 9.9 | | Cash and cash equivalents at he beginning of the year | 86.4 3 4.8 | | Set lement of share awards (Note 25) | 0.1 2 9 – 1.4 – (1.4) 3.0 | | | Effect of exchange rate changes | 3.9 (11.8) | | Purchase of own shares by EBT | | – – – (2.9) – – (2.9) | | Cash and cash equivalents at the end of the year 22 | 158.4 8 6.4 | | Tax on equity-settled share-based payments | | – – – – – 1 8 1.8 | | | | | At 31 March 2022 | 47.1 231.4 (0.7) (3.0) 60.9 772.8 1,1 08.5 | | The Notes on pages 144 to 179 form part of these Group accounts. The Notes on pages 144 to 179 form part of these Group accounts. 142 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 143 A A Financial statements ### Group accounts continued ## Notes to the Group accounts 1 Basis of preparation continued 1 Basis of preparation Standards or interpretations issued but not yet applied RS Group plc (formerly Electrocomponents plc) (the Company) is a public limited company registered in England and Wales and listed on the The Group does not consider that any standards or interpretations issued by the IASB, but not yet applicable, will have a significant impact on London Stock Exchange. the accounts. For financial years beginning on or after 1 January 2021, UK-registered listed companies are required to use UK-adopted international accounting standards (UK IAS) when preparing their consolidated accounts. UK IAS comprise the European Union-adopted international accounting 2 Segmental reporting standards at 31 December 2020 and subsequent changes approved by the UK Endorsement Board. International accounting standards are the The Group’s operating segments comprise three regions: EMEA, Americas and Asia Pacific. Their principal activities are described on pages 40 to International Accounting Standards (IAS), International Financial Reporting Standards (IFRS) and related interpretations issued by the International 43. The operating segments’ performance is assessed on revenue and adjusted operating profit on a monthly basis by the chief operating decision Accounting Standards Board (IASB). maker, who is the Chief Executive Officer. Inter-segment pricing is determined on an arm’s length basis, comprising sales of product at cost and a handling charge included within distribution and marketing expenses. The Company transitioned to UK IAS in its Group accounts on 1 April 2021. This change constitutes a change in accounting framework and had no impact on the Group’s accounting policies, reported results or financial position. Year ended 31 March 2022 The Group accounts for the year ended 31 March 2022 are presented in sterling and rounded to £0.1 million. They are prepared in accordance | | | EMEA | | Americas | | Asia Pacific | | Group | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | with UK IAS and the requirements of the Companies Act 2006. | | | £m | | £m | | £m | | £m | | The Group accounts have been prepared on a going concern basis (see the going concern statement on page 57) under the historical cost | Revenue from external customers 1,579.5 718.7 255.5 2,553.7 | | | | | | | | | | convention, modified by the revaluation of retirement benefit obligations and certain financial assets and liabilities (including derivative financial | Segmental operating profit 243.7 99.3 29.3 372.3 | | | | | | | | | instruments) as explained in the relevant notes. The principal accounting policies have been applied consistently unless otherwise stated. Central costs (51.9) djusted operating profi 320.4 Basis of consolidation mor isa ion of acquired intangibles (11.6) The Group accounts comprise the results, assets and liabilities of the Company and all its subsidiaries (together referred to as the Group) and Operating profit 308.8 include the Employee Benefit Trust (EBT) and the Group’s interest in a joint venture. Subsidiaries are entities controlled by the Company. The joint venture is accounted for using the equity method of accounting. Net finance costs (7.1) Share of profit of joint venture 0.5 The results of businesses acquired in the year are consolidated from the effective date of acquisition. The net assets of businesses acquired are incorporated in the Group accounts at their fair values at the date of acquisition. Profit before tax 302.2 Intra-group transactions and balances are eliminated in preparing the Group accounts and no profit or loss is recognised on intra-group | transactions. Unrealised gains or losses arising from transactions with the joint venture are eliminated to the extent of the Group’s interest in | Segmental capital expenditure 36.6 8.8 0.1 45.5 | | | --- | --- | --- | | the entity. | Central costs | – | | | Capital expenditure | 45.5 | Estimates and judgements The preparation of accounts in accordance with UK IAS requires the Group to make judgements and estimates that affect the application of Segmental depreciation and amortisation 38.0 9.6 3.0 50.6 accounting policies and reported amounts of assets and liabilities, income and expenses. Except for judgements involved in estimations, no Central costs 1.5 judgements have been made in the process of applying the Group’s accounting policies that have had a significant effect on the amounts recognised in the accounts. The judgements involved in estimations take account of the likely impact of climate change, geopolitical uncertainties mor isa ion of acquired intangibles 11.6 and the Group’s latest assumptions of any likely further impact of the COVID-19 pandemic and its variants. Depreciation and amortisation 63.7 Significant estimates are those that have a significant risk of resulting in a material adjustment to the carrying amounts of the Group’s assets and | liabilities within the next year. The significant estimates made in preparing the accounts were in relation to retirement benefit obligations and further | Year ended 31 March 2021 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | details on the application of these estimates can be found in Note 10. While not significant estimates, the Group also focuses on estimates made in | | EMEA | | Americas | | Asia Pacific | | Group | | | | | | £m | | £m | | £m | | £m | relation to inventories (Note 18), uncertain tax positions (Note 11) and the review of intangibles and other assets for impairment (Notes 14 and 23). Further details are provided in the relevant notes. Revenue from external customers 1,277.4 517.0 208 3 2,002.7 Segmental operating profit 172.6 51.9 1.4 225.9 Actual results in the longer term may differ from these estimates. Central costs (37.6) | Foreign currency | djusted operating profi | 188.3 | | --- | --- | --- | | Foreign currency transactions | mor isa ion of acquired intangibles (7.0) | | | Transactions in foreign currencies are recorded using the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in | cquisition-related items (Note 3) (2.9) | | foreign currencies at the balance sheet date are retranslated at the rate ruling at that date and the gains and losses on translation are recognised Substantial reorganisation costs (Note 4) (11.2) in operating profit. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the Operating profit 167.2 rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated Net finance costs (6.8) at the rate ruling at the date the fair value was determined. Share of profit of joint venture 0.2 Translation of foreign operations Profit before tax 160.6 The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated at exchange rates ruling at the balance sheet date. The income statement and cash flows of foreign operations are translated at the average rate for the period. Segmental capital expenditure 43 8 11.6 0.8 56.2 Standards and interpretations adopted in the year Central costs – No accounting standards, amendments or revisions to existing standards or interpretations have become effective which have a material impact on Capital expenditure 56.2 the reported results or financial position of the Group. In April 2021, the IASB ratified a decision made by the IFRS Interpretations Committee that IFRS provide an adequate basis for deciding how to Segmental depreciation and amortisation 35.7 8.8 3.5 48.0 account for configuration or customisation costs in a cloud computing arrangement. The decision includes steps companies should follow when Central costs 1.5 deciding the relevant accounting treatment, which the Group followed during the year. There was no material impact on the reported results or mor isa ion of acquired intangibles 7.0 financial position of the Group. Depreciation and amortisation 56.5 144 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 145 A A A A A A A t t Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 2 Segmental reporting continued 3 Alternative Performance Measures (APMs) Disaggregation of revenue The Group uses a number of APMs in addition to those measures reported in accordance with UK IAS. Such APMs are not defined terms under In the table below, revenue is disaggregated by own-brand products or other products and service solutions, and also by sales channels. UK IAS and are not intended to be a substitute for any UK IAS measure. The Directors believe that the APMs are important when assessing the The digital sales channel is now further disaggregated into web (sales completed on our websites), and eProcurement and other digital, as web underlying financial and operating performance of the Group. The APMs are used internally for performance analysis and in employee incentive revenue is a truer representation of the Group’s digital demand. The Group’s largest own-brand is RS PRO. £2,483.9 million of revenue is arrangements, as well as in discussions with the investment analyst community. recognised at a point in time (2020/21: £1,973.8 million) and £69.8 million over time (2020/21: £28.9 million). The APMs improve the comparability of information between reporting periods by adjusting for factors such as fluctuations in foreign exchange EMEA Americas Asia Pacific Group rates, number of trading days and items, such as reorganisation costs, that are substantial in scope and impact and do not form part of operational £m £m £m £m or management activities that the Directors would consider part of underlying performance. The Directors also believe that excluding recent Year ended 31 March 2022 acquisitions and acquisition-related items aid comparison of the underlying performance between reporting periods and between businesses with similar assets that were internally generated. Own-brand products / other products and service solutions Own-brand products 300.2 4.8 34.0 339.0 Adjusted profit measures Other product and service solutions 1,279.3 713.9 221.5 2,214.7 These are the equivalent UK IAS measures adjusted to exclude amortisation of intang ble assets arising on acquisition of businesses, Group 1,579.5 718.7 255.5 2,553.7 acquisition-related items, substantial reorganisation costs, substantial asset write-downs, one-off pension credits or costs, significant tax rate changes and, where relevant, associated tax effects. Adjusted profit before tax is a performance measure for the annual bonus and adjusted Sales channel earnings per share is a performance measure for the Long Term Incentive Plan (LTIP). Adjusted operating profit conversion, adjusted operating profit margin and adjusted earnings per share are financial key performance indicators (KPIs) which are used to measure the Group's progress Web 781.7 241.8 121.8 1,145.3 in delivering the successful implementation of its strategy and monitor and drive its performance. | eProcurement and other digital | 344.6 69.8 33.9 448.3 | | | | | | | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | Operating | | | Operating | | | | | | | | Basic | Diluted | | Digital | 1,126.3 311.6 155.7 1,593.6 | | | | | | | | | | | | | | | | | | | | | | Operating | | | Operating | | | profit | | | profit | | | Profit | | Profit | earnings | | earnings | | | | | costs | 1 | | profit | | margin | 2 | conversion | | 3 | before tax | | for the year | | per share | | per share | Offline 453.2 407.1 99.8 960.1 £m £m % % £m £m p p Group 1,579.5 718.7 255.5 2,553.7 Year ended 31 March 2022 Reported (819.1) 308.8 12.1% 27.4% 302.2 230.0 48.9p 48.6p Year ended 31 March 2021 mor isa ion of acquired intangibles 11.6 11.6 11.6 11.5 2.4p 2.4p Own-brand products / other products and service solutions Adjusted (807.5) 320.4 12.5% 28.4% 313.8 241.5 51.3p 51.0p Own-brand products 248 5 3.6 27.7 279.8 Other product and service solutions 1,028 9 513.4 180.6 1,722.9 Year ended 31 March 2021 Group 1,277.4 517.0 208 3 2,002.7 Reported (688.8) 167.2 8 3% 19.5% 160.6 125.5 27.7p 27 5p mor isa ion of acquired intangibles 7 0 7.0 7 0 5.6 1.2p 1.2p Sales channel cquisi ion-related items 2 9 2.9 2 9 2.5 0.5p 0.5p Web 636.6 142.8 92 5 871.9 Substantial reorganisation costs (Note 4) 11 2 11.2 11 2 8.5 1.9p 1 9p eProcurement and other digital 295.7 60.4 26.1 382.2 Adjusted (667.7) 188.3 9.4% 22.0% 181.7 142.1 31.3p 31.1p Digital 932 3 203.2 118.6 1,254.1 1. Operating costs are distribution and marketing expenses plus administrative expenses. Offline 345.1 313.8 89.7 748.6 2. Operating profit margin is operating profit expressed as a percentage of revenue. 3. Operating profit conversion is operating profit expressed as a percentage of gross profit. Group 1,277.4 517.0 208 3 2,002.7 Acquisition-related items comprise transaction costs directly attributable to the acquisition of businesses and deferred consideration payments relating to the retention of former owners of businesses acquired. Revenue and non-current assets by geographical location In the table below, revenue is based on the location of the Group operation where the sales originated and non-current assets are based on Like-for-like revenue and profit measures the location of the assets. Non-current assets exclude interest rate swaps, other financial instruments, retirement benefit net assets and deferred L ke-for-l ke revenue and profit measures are adjusted to exclude the effects of changes in exchange rates on translation of overseas profits. tax assets. They exclude acquisitions in the relevant years until they have been owned for a year, at which point they start to be included in both the current Revenue Non-current assets and comparative years for the same number of months. The Group's acquisitions were purchased during 2020/21. These measures enable | 2022 | 2021 | 2022 | | 2021 | | management and investors to track more easily, and consistently, the underlying performance of the business. | | --- | --- | --- | --- | --- | --- | --- | | | | | restated | | 1 | | | £m | £m | £m | | £m | | | The principal exchange rates applied in preparing the Group accounts and in calculating the following like-for-like measures are: UK (country of domicile) 646.7 513.6 232.9 248.8 | | | | | 2022 | | 2022 | | 2021 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | USA 672.7 489.2 378.5 365.9 | | | Average | | Closing | | Average | | Closing | | France | 285.5 251.3 9.1 9.6 | US dollar 1.366 1.313 1.308 1.377 | | | | | | | | | Germany | 190.5 148.3 59.5 53.5 | Euro 1.176 1.183 1.121 1.174 | | | | | | | | | Italy | 116.9 96.1 5.0 6.0 | | | | | | | | | | Rest of world | 641.4 504.2 14.8 14.3 | | | | | | | | | | Group | 2,553.7 2,002.7 699.8 698.1 | | | | | | | | | 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). 146 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 147 A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 3 Alternative Performance Measures (APMs) continued 3 Alternative Performance Measures (APMs) continued Like-for-like revenue change Free cash flow, adjusted free cash flow and adjusted operating cash flow conversion L ke-for-l ke revenue change is also adjusted to eliminate the impact of trading days year on year. It is calculated by comparing the revenue of the Free cash flow is the net movement in cash and cash equivalents before net cash used in financing activities, acquisition of businesses and base business for the current year with the prior year converted at the current year’s average exchange rates and pro-rated for the same number cash and cash equivalents acquired with businesses. Free cash flow is also net cash from operating activities less purchase of intangible assets, of trading days as the current year. It is a performance measure for the annual bonus and a financial KPI. property, plant and equipment plus any proceeds on sale of intangible assets, property, plant and equipment. Adjusted free cash flow is free cash flow adjusted for the impact of substantial reorganisation and acquisition-related items cash flows and is a performance measure for the annual £m bonus. Adjusted operating cash flow conversion is adjusted free cash flow before income tax and net interest paid, expressed as a percentage of Revenue for 2021 2,002.7 adjusted operating profit and is a financial KPI. Effect of exchange rates (62.7) | | | 2022 | 2021 | | --- | --- | --- | --- | | Effect of trading days 10.5 | | £m | £m | | Revenue for 2021 at 2022 rates and trading days 1,950.5 | Net cash from operating activities 203.0 187.6 | | | Purchase of intangible assets, property, plant and equipment (42.5) (54.7) Less Free cash flow 160.5 132.9 acquisitions 2022 2021 at 2022 dd back: impact of substantial reorganisation cash flows 2.4 9.6 2022 owned base rates and Like-for-like Group <1 year business 2021 trading days change dd back: impact of acquisition-related items cash flows – 2.9 £m £m £m £m £m % Adjusted free cash flow 162.9 145.4 EMEA 1,579.5 52.3 1,527.2 1,277.4 1,250.7 22% dd back: income tax paid 57.1 35.2 mericas 718.7 42.5 676.2 517.0 499 0 36% dd back: net interest paid 7.0 8.3 sia Pacific 255.5 – 255.5 208.3 200 8 27% djusted free cash flow before income tax and net interest paid 227.0 188.9 | Revenue | 2,553.7 94.8 2,458.9 2,002.7 1,950 5 26% | | | | | --- | --- | --- | --- | --- | | | | djusted operating profi | 320.4 188.3 | | | | | Adjusted operating cash flow conversion | | 70.8% 100.3% | Gross margin and like-for-like gross margin change Gross margin is gross profit divided by revenue. L ke-for-like change in gross margin is calculated by taking the difference between gross margin for the base business for the current year and gross margin for the prior year with revenue and gross profit converted at the current year’s average Earnings before interest, tax, depreciation and amortisation (EBITDA) and net debt to adjusted EBITDA exchange rates. EBITDA is operating profit excluding depreciation and amortisation. Net debt to adjusted EBITDA (one of the Group’s debt covenants) is the ratio of net debt to EBITDA excluding acquisition-related items, substantial reorganisation costs, substantial asset write-downs and one-off pension Less credits or costs. | | acquisitions | | | | 2022 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 | | owned | | | base | | 2021 at 2022 | | Like-for-like | | | | | | | | | | | | | | | | | | 2022 | 2021 | | Group | | <1 year | | business | | 2021 | | rates | | change | | | | | | | | | | | | | | | | | £m | £m | | £m | | | £m | | £m | £m | | £m | | | pts | | | Operating profit 308.8 167.2 Revenue 2,553.7 94.8 2,458.9 2,002.7 1,940 0 dd back: depreciation and amortisation 63.7 56.5 Gross profit 1,127.9 33.1 1,094.8 856.0 829.6 Gross margin 44.2% 34.9% 44.5% 42.7% 42 8% 1.7 pts EBITDA 372.5 223.7 dd back: acquisition-related items – 2.9 Like-for-like profit change dd back: substantial reorganisation costs – 11.2 L ke-for-l ke change in profit is calculated by comparing the base business for the current year with the prior year converted at the current year’s Adjusted EBITDA 372.5 237.8 average exchange rates. Net debt (Note 22) 42.1 122.0 | | | Less | | | | | | | | Net debt to adjusted EBITDA | 0.1x 0.5x | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | acquisitions | | | 2022 | | | | | | | | | 2022 | | owned | | base | | 2021 at 2022 | | Like-for-like | | | | | Group | | <1 year | business | | 2021 | | rates | | change | | | Earnings before interest, tax and amortisation (EBITA) and EBITA to interest £m £m £m £m £m % EBITA is adjusted EBITDA after depreciation. EBITA to interest (one of the Group’s debt covenants) is the ratio of EBITA to finance costs including Segmental operating profit capitalised interest less finance income. EMEA 243.7 4.2 239.5 172.6 164.4 46% | | | | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | | | Americas | 99.3 1.1 98.2 51.9 49.7 98% | | | | £m | £m | | | Asia Pacific | 29.3 – 29.3 1.4 0 3 >200% | djusted EBITD | 372.5 237.8 | | | | | Segmental operating profit | | 372.3 5.3 367.0 225.9 214.4 71% | Less: depreciation (33.5) (32.5) | | | | | | Central costs (51.9) – (51.9) (37.6) (37.6) 38% | | | EBITA | | | 339.0 205.3 | | | Adjusted operating profit | | 320.4 5.3 315.1 188.3 176 8 78% | Finance costs 8.1 8.6 | | | | | | Adjusted profit before tax 313.8 5.1 308.7 181.7 170 3 81% | | | Less: finance income (1.0) (1.8) | | | | | | Adjusted earnings per share 51.3p 0.8p 50.5p 31.3p 29.3p 72% | | | dd back: capitalised interes | | 0.5 0.9 | | | | | djusted diluted earnings per share 51.0p 0.8p 50.2p 31.1p | | Interest (per debt covenants) | | | 7.6 7.7 | | EBITA to interest 44.6x 26.7x 148 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 149 A A A A A A A A A A A A A A A t t Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 3 Alternative Performance Measures (APMs) continued 5 Revenue recognition Return on capital employed (ROCE) Revenue from the sale of goods is recognised in the income statement when control of the goods has transferred, which in most countries is ROCE is adjusted operating profit expressed as a percentage of monthly average net assets excluding net debt and retirement benefit obligations contractually on delivery to the customer but in a few countries is contractually on collection from the Group’s distribution centre by the delivery and is an underpin for the LTIP and a financial KPI. company. When the Group arranges the delivery of goods where control has transferred on collection, the customer is invoiced an amount to cover the cost of freight and this is included in revenue over time as the goods are shipped. Customers are invoiced on dispatch of the goods. 2022 2021 Revenue is measured with reference to the amount invoiced to the customer, net of any immediate discounts applicable to the order. £m £m Obligations for retrospective customer volume discounts are calculated by estimating the expected discount percentage that will be achieved verage net assets 982.8 791.0 for the contractual period using historical data adjusted for current experience and applying that percentage to actual qualifying sales. When a dd back: average net deb 82.7 127.2 customer has a right to return goods purchased, the Group estimates the obligation for the expected value of the refunds using recent experience. dd back: average retirement benefit net (assets) / obliga ions 49.3 53.8 Obligations for both retrospective customer volume discounts and the expected value of refunds for returns are deducted from the revenue verage capital employed 1,114.8 972.0 recognised when the goods are sold and included in other payables on the balance sheet and at 31 March 2022 were £15.0 million (2020/21: £9.6 million). djusted operating profi 320.4 188.3 ROCE 28.7% 19.4% Revenue from the fees charged to customers for the provision of outsourced services is recognised either over time based on time elapsed for monthly management charges or when the related products are delivered for other management charges. Invoices are raised monthly for monthly management charges or when the invoices for the related products are invoiced for other management charges, normally on a weekly or monthly Working capital as a percentage of revenue basis. The Group acts as an agent in relation to the products sourced for its customers under these outsourcing arrangements and so does not Working capital is inventories, current trade and other receivables and current trade and other payables. recognise the value of these products in revenue or cost of sales. Revenue is measured with reference to the amount invoiced to the customer 2022 2021 for management charges. Income earned from suppliers for access to the Group’s online procurement portals is recognised either over time based restated 1 on time elapsed for subscription fees or as their products are delivered to the Group’s customers for licence fees. Invoices are raised monthly, £m £m quarterly or annually in advance for subscription fees depending on contractual terms. Credit notes for licence fee income are received from Inventories 529.5 419.8 suppliers depending on contractual terms with the least frequent being annual. Current trade and other receivables 594.3 493.6 Revenue from the sale of cal bration services is recognised when control of the services has transferred, which is upon delivery to the customer Current trade and other payables (584.1) (475.3) of the items which have been calibrated. Customers are invoiced on dispatch of the calibrated items. Revenue is measured with reference to the Working capital 539.7 438.1 amount invoiced to the customer. Revenue 2,553.7 2,002.7 All revenue is recognised net of sales taxes and all payment terms are based on commercially reasonable terms for the respective markets and no Working capital as a percentage of revenue 21.1% 21.9% element of financing is deemed present. 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). Remaining performance obligations (unsatisfied or partially unsatisfied) at the year end all relate to customer contracts that have an original expected duration of not more than one year or are invoiced based on time incurred. Therefore, as permitted under IFRS 15 ‘Revenue from Inventory turn Contracts with Customers’, the transaction price allocated to these remaining performance obligations is not disclosed. Inventory turn is cost of sales divided by inventories. 2022 2021 6 Cost of sales and operating profit £m £m Cost of sales comprises the cost of goods delivered to customers and the write-down of inventories to net realisable value. Cost of sales 1,425.8 1,146.7 When a customer has a right to return goods, the Group estimates the expected value of the goods that are likely to be returned based on Inventories 529.5 419.8 historical experience and the expected gross margin. It recognises an asset in other receivables for the right to recover these goods and deducts Inventory turn 2.7 2.7 this from cost of sales when the goods are sold. The Group receives rebates from certain suppliers relating mainly to the volume of purchases made in a specified time period. These rebates Ratio of capital expenditure to depreciation are recognised as a reduction in cost of sales to the extent that the inventories purchased from the supplier and eligible for rebates have been Ratio of capital expenditure to depreciation is capital expenditure divided by depreciation and amortisation excluding amortisation of acquired sold in the year. Rebates on purchases that remain in inventories are deducted from the cost of inventories, thus reducing cost of sales in the intangibles and depreciation of right-of-use assets. income statement in the period in which the inventories are expensed. The Group recognises the rebate only where there is evidence of a binding 2022 2021 arrangement with the supplier, the amount can be estimated reliably and receipt is probable. The Group estimates whether the supplier rebates £m £m relate to products already sold or remaining in inventories, based on inventory turns. When estimating the value of supplier rebates earned but Depreciation and amortisation 63.7 56.5 not yet received, the Group makes assumptions about the likely volume of elig ble purchases to be made over the remaining rebate period. Less: amortisation of acquired intangibles (11.6) (7.0) As at 31 March 2022, the Group has £4.5 million (2020/21: £4.7 million) of supplier rebates recognised within trade and other receivables. Less: depreciation of right-of-use assets (17.7) (17.1) Operating profit is stated after charging / (crediting): djusted depreciation and amortisation 34.4 32.4 | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | | Capital expenditure 45.5 56.2 | | | £m | £m | | Ratio of capital expenditure to depreciation | 1.3 times 1.7 times | Fees payable to the Company’s auditors for the audit of the Company and Group accounts 0.7 0.5 | | | Fees payable to the Company’s auditors and their associates for other services: 4 Substantial reorganisation costs Audit of the Company’s subsidiaries 1.3 1.4 In September 2020 the Group launched RISE to enable it to move faster to accelerate the delivery of its strategy. It is a two-year evolutionary Audit-related assurance services 0.1 0.1 programme to simplify the Group’s operating model, accelerate growth and reduce the cost to serve. In the year ended 31 March 2021, Total fees payable to the Company’s auditors and their associates 2.1 2.0 redundancy and associated costs of £11.2 million were incurred. No further costs were incurred in the year ended 31 March 2022. These costs have been excluded from adjusted performance measures. Depreciation of property, plant and equipment 15.8 15.4 mor isa ion of intangible assets included in distribu ion and marketing expenses 18.6 17.0 mor isa ion of intangible assets included in administrative expenses 11.6 7.0 mor isa ion of government grants (0.1) (0.4) | Loss on foreign exchange | 5.9 1.7 | | --- | --- | | Net (gains) / losses on forward foreign exchange contracts classified as fair value through profit or loss | (1.0) 0.5 | | Loss on disposal of intangible assets | 2.1 0.1 | | Loss on disposal of property, plant and equipment | 0.3 0.2 | 150 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 151 A A A A A A A A A t t Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 7 Finance income and costs 9 Share-based payments continued Finance costs that are directly attr butable to the construction of an asset that necessarily takes a substantial period of time to get ready for its Long Term Incentive Plan (LTIP) – equity settled and cash settled intended use are capitalised as part of the cost of that asset. Other finance costs and finance income are calculated using the effective interest As at 31 March 2022, outstanding LTIP awards are those made under the 2019 LTIP. Awards under the 2019 LTIP are subject to a service method and recognised in the income statement as incurred. condition and normally a market performance condition based on total shareholder return (TSR) of the Group versus a defined comparator group (see the Directors’ Remuneration Report for details) and a non-market performance condition based on cumulative growth in adjusted earnings per 2022 2021 £m £m share (EPS) over the vesting period with a ROCE underpin. At the vesting date, the award will either vest, in full or in part, or expire depending on the outcome of the performance conditions. Finance income Interest income on financial assets measured at amortised cost 0.4 1.2 In June 2021, the final awards under the 2016 LTIP granted in 2019 vested. These awards were subject to a service condition, a market performance condition based on TSR of the Group versus a defined comparator group (see the Directors’ Remuneration Report for details) and Interest income on interest rate swaps 0.6 0.6 non-market performance conditions based on cumulative growth in adjusted EPS over the vesting period and Group ROCE. Awards under the Finance income 1.0 1.8 2016 LTIP may have included a further award (a multiplier) that vested if the Group achieved exceptional adjusted EPS performance over the vesting period. Finance costs Some of the awards are equity settled and some are cash settled. All awards have £nil exercise price and receive accrued dividends Interest expense on financial liabilities measured at amortised cost (6.6) (6.7) on settlement. Interest expense on lease liabili ies (0.9) (1.0) The fair value of equity-settled LTIP awards subject to market conditions was calculated at the grant date using a Monte Carlo model, with the Interest expense on interest rate swaps – (0.4) assumptions below. Interest on uncertain income tax posi ions (0.2) (0.3) 2022 2021 | Invoice finance charges | (0.4) (0.2) | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | December | | June | December | | November | | July | | Finance costs | (8.1) (8.6) | | 2021 | 2021 | | 2020 | | 2020 | 2020 | Grant date Invoice finance charges relate to costs incurred when the Group makes use of its customers’ supplier invoice financing options where this is Market performance conditions commercially and administratively attractive. These options are used for some outsourced services customers where they give the Group access wards granted 35,159 568,179 32,218 610,515 – to the customers’ invoice portals to simplify the invoice query reconciliation process and so speed up the receipt of payments. Fair value at grant date 608p 586p 400p 402p – ssump ions used: 8 Employees | | | Share price | 1,168p 1,017p 873p 822p – | | --- | --- | --- | --- | | Average number of employees | 2022 2021 | | | | | | Expected vola ility | 30.4% 31.5% 32.1% 32.1% – | Management and administration 1,430 1,234 | | | | 2 years | | 2 years | 2 years | | | --- | --- | --- | --- | --- | --- | --- | --- | | Distribu ion and marketing 5,953 5,572 | | Expected life | | 3 years | | | – | | | | | 5 months | | 5 months | 6 months | | | | 7,383 6,806 | Risk-free interest rate | 0.51% 0.19% (0.07)% (0.03)% – | | | | | Other conditions | | 2022 | 2021 | wards granted 54,117 568,179 41,410 610,515 37,936 | | | --- | --- | --- | --- | --- | | Employment costs | £m | £m | | | | | | | Fair value at grant date | 1,168p 1,017p 873p 822p 670p | Wages and salaries 317.3 248.6 Expected volatility was estimated based on the historical volatility of the Company’s shares over the most recent period commensurate to the Social security costs 40.3 33.9 expected life of the award. The risk-free interest rate represents the yield, at the grant date, of UK government bonds with duration commensurate Share-based payments – equity-settled (Note 9) 9.9 7.0 to the expected life of the award. Share-based payments – cash-settled (Note 9) 3.7 6.2 The fair values of cash-settled LTIP awards at 31 March 2022 were: | Defined contribution retirement benefit costs (Note 10) | 17.1 15.8 | | | | --- | --- | --- | --- | | | | Awards | Fair | | Defined benefit retirement benefit costs (Note 10) | 4.3 4.6 | | | | | | granted | value | 392.6 316.1 July 2019 – Other conditions 14,626 1,084p Termination benefits 3.2 10.9 July 2019 – Market performance conditions 14,626 997p | Total | 395.8 327.0 | | | | --- | --- | --- | --- | | | | December 2019 – Other conditions | 3,055 1,084p | | Information on the Directors’ remuneration is given in the Directors’ Remuneration Report on pages 108 to 129. | | December 2019 – Market performance condi ions | 3,055 997p | | | | November 2020 – Other conditions | 1,147 1,084p | 9 Share-based payments November 2020 – Market performance condi ions 1,147 629p The Group operates share-based payment schemes which are the Long Term Incentive Plan, the Deferred Share Bonus Plan and the June 2021 – Other condi ions 4,393 1,084p Savings-Related Share Option Scheme. June 2021 – Market performance conditions 4,393 –p Equity-settled share-based payments are measured at fair value at the grant date, calculated using an appropriate option pricing model. The fair value is expensed in the income statement with a corresponding increase in equity on a straight-line basis over the period that employees become The movements in the LTIP awards (equity and cash settled) were: unconditionally entitled to the awards. The income statement charge is adjusted to reflect expected and actual levels of vesting associated with | | | 2022 | | 2021 | | --- | --- | --- | --- | --- | | non-market performance related criteria. | Number of | | Number of | | | | | awards | | awards | Cash-settled share-based payments are measured at fair value at the balance sheet date, taking into account the estimated number of awards that Outstanding at 1 April 3,888,385 4,039,605 will actually vest and the relative completion of the vesting period. This fair value is included in liabilities and changes in the value of these liabilities Forfeited during the year (116,794) (257,279) are recognised in the income statement. Expired during he year (463,084) (87,743) The EBT established to administer the schemes owns shares in the Company which are shown in equity. | Exercised during the year | (602,250) (1,141,086) | | --- | --- | | Granted during the year | 1,234,420 1,334,888 | | Outstanding at 31 March | 3,940,677 3,888,385 | 152 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 153 A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 9 Share-based payments continued 9 Share-based payments continued Deferred Share Bonus Plan (DSBP) – equity settled The movements in and weighted average exercise price of the SAYE options (equity and cash settled) were: Under the DSBP, at least one-third of the total bonus earned by plan participants is awarded as shares and deferred for two years, normally 2022 2021 subject to the continued employment of the participant within the Group. There are no other performance conditions. The participants receive | | Weighted | | | | Weighted | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | accrued dividends on vesting. Deferred share awards relating to the bonus for the year ended 31 March 2022 will be awarded in June 2022. | average | | | | average | | | | | The fair value of the shares awarded during the year was 1,011p (2020/21: 677p) per share award which was the share price at the date of award. | exercise | | Number of | | exercise | | Number of | | | | | price | | options | | price | | options | The movements in the DSBP awards were: Outstanding at 1 April 496p 4,255,490 439p 4,606,449 | | | 2022 | | 2021 | Forfeited during the year 513p (254,408) 488p (236,121) | | | --- | --- | --- | --- | --- | --- | --- | | | Number of | | Number of | | | | | | | awards | | awards | Expired during he year | 538p (272,929) 449p (295,624) | | Outstanding at 1 April 247,103 199,169 | | | | | Exercised during the year | 497p (739,677) 375p (1,166,575) | | Exercised during the year (110,595) (88,574) | | | | | Granted during the year | 824p 862,136 573p 1,347,361 | | Granted during the year | 123,062 136,508 | | | | Outstanding at 31 March | 564p 3,850,612 496p 4,255,490 | | Outstanding at 31 March | 259,570 247,103 | | | | Exercisable at 31 March 497p 6,669 472p 8,202 | | SAYE options outstanding at the year end were: Savings-Related Share Option Scheme (SAYE) – equity settled and cash settled 2022 2021 The SAYE scheme is available to the majority of employees of the Group employed at the time that the invitation period commences. The UK element is equity settled and the overseas element is cash settled. The option price is based on the average market price of the Company’s Op ion prices: shares over the three days prior to the offer, discounted by 20%. The option exercise conditions are the employee’s continued employment for a £2.00-£2 99 1,310 141,163 three-year period and the maintenance of employee’s regular monthly savings. Failure of either of these conditions is normally deemed a forfeiture £4.00-£4 99 1,817,577 2,081,193 of the option. Employees may subscr be to the three-year or five-year scheme. Under the UK element, at the end of the savings period, the £5.00-£5 99 1,203,013 2,033,134 employee has six months to either exercise their options to purchase the shares at the agreed price or withdraw their savings with accrued interest. £8.00-£8 99 828,712 – Under the overseas element, at the end of the savings period, the employee has six months to either exercise their options to receive cash equal to the difference between the market price and the option price or withdraw their savings with accrued interest. There are no market conditions 3,850,612 4,255,490 attached to the vesting of the options. Weighted average remaining contractual life (in years) 1.63 0 52 The fair value of equity-settled SAYE options was calculated at the grant date using a Black-Scholes model, with the assumptions below. Weighted average share price during period of exercise 1,097p 724p 2022 2021 10 Retirement benefit obligations | | | 3 year | | 5 year | | 3 year | | 5 year | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | September | | September | | September | | September | | For defined benefit schemes, the surplus or deficit recognised in the balance sheet is the difference between the fair value of the scheme | | Grant date | | 2021 | | 2021 | | 2020 | | 2020 | assets and the present value of the obligations at the balance sheet date. The present value of the obligations is measured using the projected | | Options granted 544,216 83,697 753,125 185,372 | | | | | | | | | unit credit method and a discount rate reflecting yields on high-quality corporate bonds. The operating profit charge comprises the current | service cost, net interest cost, past service costs, administrative expenses, curtailment gains and losses and settlement gains and losses. Fair value at grant date 349p 372p 155p 179p The net interest cost is based on the discount rate at the beginning of the year, contr butions paid in and the surplus or deficit during the year. ssump ions used: Past service costs and curtailment gains and losses are recognised at the earlier of when the scheme amendment or curtailment occurs and Share price 1,108p 1,108p 662p 662p when any related reorganisation costs or termination benefits are recognised. Settlement gains and losses are recognised when the settlement Exercise price 824p 824p 573p 573p occurs. Remeasurements, representing returns on scheme assets excluding amounts included in interest and actuarial gains and losses arising Expected volatility 31.5% 30.3% 32 0% 33.0% from changes in demographic and financial assumptions and experience adjustments, are recognised in other comprehensive income. Expected option life 3 years 5 years 3 years 5 years The Group’s largest defined benefit pension scheme is in the UK, providing benefits based on final pensionable pay for eligible employees who Expected dividend yield 1.44% 1.44% 2.10% 2.10% joined on or before 1 April 2003. The scheme is administered by a corporate trustee and the funds are independent of the Group’s finances. The Group also has defined benefit pension schemes in Germany and the Republic of Ireland, which are closed to both new members and Risk-free interest rate 0.30% 0.42% (0.10)% (0.06)% accruals for future service, and defined benefit retirement indemnity schemes in France and Italy. Expected volatility was estimated based on the historical volatility of the Company’s shares over the most recent three-year or five-year period as For defined contr bution schemes, the costs are charged to operating profit as they fall due. The Group has defined contribution schemes in the appropriate. Expected dividend yield was the annual dividend yield as at the grant date. The risk-free interest rate was the yield, at the grant date, UK, Australia, North America, Germany and the Republic of Ireland. The Group contributes to government schemes in France, Italy, Scandinavia of three-year or five-year (as applicable) UK government bonds. and Asia and these are defined contribution schemes. The Group also makes payments to employees’ personal pensions in the UK when their | The fair value of cash-settled SAYE options is calculated at year end using a Black-Scholes model, with the assumptions below for 31 March 2022. | | | | | | | | | | employing company does not provide defined benefit or defined contribution schemes. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | Expected | Expected | | | | | | | Options | Exercise | | Expected | remaining | dividend | | | Risk-free | Regulatory framework and governance | | | granted Fair value Share price | | price | volatility | option life | | yield | interest rate | | | The UK scheme, the Electrocomponents Group Pension Scheme, is a registered scheme established under trust law and, as such, is subject 5 year June 2017 25,073 608p 1,084p 472p 31.4% 0.5 year 1.48% 1.26% to UK pension, tax and trust legislation. It is managed by a corporate trustee, Electrocomponents Pension Trustees Limited (the Trustee). 5 year June 2018 35,052 510p 1,084p 563p 25.5% 1.5 years 1.48% 1.36% The Trustee includes representatives appointed by both the Company and employees. Although the Company bears the financial cost of the 3 year September 2019 590,962 639p 1,084p 439p 31.4% 0.5 year 1.48% 1.26% scheme, the Trustee directors are respons ble for the overall management of the scheme including compliance with applicable regulations and legislation. The Trustee directors are required by law to act in the interest of all relevant beneficiaries and to set certain policies, to manage the 5 year September 2019 99,256 625p 1,084p 439p 32.1% 2.5 years 1.48% 1.35% day-to-day administration of the benefits and to set the scheme investment strategy in consultation with the Company. 3 year September 2020 389,066 500p 1,084p 573p 25.5% 1.5 years 1.48% 1.36% UK pensions are regulated by the Pensions Regulator whose statutory objectives and regulatory powers are descr bed on its website: 5 year September 2020 19,798 516p 1,084p 573p 31.5% 3.5 years 1.48% 1.46% www.thepensionsregulator.gov.uk. 3 year September 2021 222,284 335p 1,084p 824p 32.1% 2.5 years 1.48% 1.35% 5 year September 2021 11,939 363p 1,084p 824p 30.0% 4.5 years 1.48% 1.40% Expected volatility is estimated based on the historical volatility of the Company’s shares over the most recent period commensurate to the expected remaining life of the option. Expected dividend yield is the annual dividend yield as at the year end. The risk-free interest rate is the yield, at the year end, of UK government bonds with duration commensurate to the expected remaining life of the option. 154 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 155 A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 10 Retirement benefit obligations continued 10 Retirement benefit obligations continued Deficit position and funding Life expectancy assumptions The rules of the Electrocomponents Group Pension Scheme give the Trustee powers to wind up the scheme, which it may exercise if the Trustee Based upon the demographics of scheme members, the weighted average life expectancy assumptions used to determine the UK defined benefit is aware that the assets of the scheme are insufficient to meet its liabilities. Although the scheme was in deficit on a statutory funding basis at obligations were: 31 March 2019, the Trustee and the Company agreed a plan to eliminate the deficit over time and the Trustee has confirmed that it has no current 2022 2021 intention to exercise its power to wind up the scheme. Years Years The funding of the UK scheme is assessed using assumptions in accordance with the advice of independent actuaries. These assumptions may Member aged 65 (current life expectancy) – male 22.4 22.3 be different to those used for the accounting valuation. The last triennial funding valuation was carried out as at 31 March 2019 and showed a Member aged 65 (current life expectancy) – female 23.8 23.7 deficit of £44.7 million on a statutory technical provisions basis. Under the associated recovery plan, the Group agreed to make deficit contributions Member aged 45 (life expectancy at aged 65) – male 22.9 22.8 with the aim that the scheme will be fully funded on a statutory technical provisions basis by March 2022. These deficit contributions consisted of Member aged 45 (life expectancy at aged 65) – female 25.1 25.1 an annual contr bution of at least £10.0 million, increased each 1 April by the increase in the Retail Prices Index (RPI) for the year to the preceding December, and an additional contribution of £25.0 million. This contribution could be paid in instalments and paid as and when the Group deemed At 31 March 2022, the weighted average duration of the UK defined benefit obligation was 18 years (2020/21: 19 years). appropriate, provided the total additional contr bution was paid no later than 31 March 2022. During 2021/22, the remaining £12.5 million (2020/21: Sensitivity analysis of the impact of changes in key assumptions the first £12.5 million) of this additional contr bution was paid. The calculations of the defined benefit obligations are sensitive to the assumptions used. The sensitivity analysis below is based on a change Based on the UK scheme’s rules, the Group does not have an unconditional right to any surplus that may arise on the scheme and so IFRIC 14 in the assumption on the UK scheme while holding all other assumptions constant; in practice changes in some of the assumptions may applies. At 31 March 2022, the defined benefit net asset has been restricted to £nil. be correlated. Based on the funding position as at 31 March 2022, in the year ending 31 March 2023 the Group expects to pay £12.8 million of contributions to A change would have the following increase / (decrease) on the UK defined benefit obligations as at 31 March 2022: the UK scheme, including £10.8 million of deficit contr bution payments, and £0.4 million to the other defined benefit schemes. The UK deficit Increase in Decrease in contribution payments may change when the triennial funding valuation as at 31 March 2022 is completed during 2022/23 and a revised funding assumption assumption plan agreed between the Trustee and the Company. £m £m Effect on obliga ion of a 0.1% change to the assumed discount rate (10.1) 10.3 Investment strategy and risk exposure Effect on obliga ion of a 0.1% change in the assumed inflation rate 5.6 (5.5) The defined benefit schemes expose the Group to actuarial risks such as longevity, interest rate, inflation and investment risks. The approach for Effect on obliga ion of a change of one year in assumed life expectancy 18.5 (18.5) managing the UK scheme’s risks is set out below. Interest rate risk Income statement The Trustee has set a benchmark for total investment in bonds (government and corporate), interest rate swaps, inflation swaps, gilt repurchase The net charge / (credit) recognised in operating profit for retirement benefit obligations was: agreements and cash as part of its matching asset portfolio (comprising the qualifying investor alternative investment fund (QIAIF), a bespoke 2022 2021 pooled structure in which the scheme is the sole investor). Under this strategy, if gilt yields fall, the value of the investments within the matching asset portfolio will rise to help match the increase in the valuation of the liabilities arising from a fall in the discount rate, which is derived from gilt UK Other Total UK Other Total £m £m £m £m £m £m yields. Similarly, if gilt yields rise, the value of the matching asset portfolio will fall, as will the valuation of the liabilities because of an increase in the discount rate. Current service cost 2.5 0.3 2.8 2.5 0.3 2.8 Past service cost – (0.1) (0.1) 0.2 (0.2) – Inflation risk Interest expense on obligation 12.7 0.2 12.9 12.6 0.3 12.9 The scheme holds index-linked gilts, inflation swaps and repurchase agreements to manage against inflation risk associated with pension liability increases. Interest income on scheme assets (12.0) (0.1) (12.1) (12.8) (0.1) (12.9) Interest expense on asset ceiling / onerous liability – – – 1.0 – 1.0 Longevity risk dministra ive expenses 0.8 – 0.8 0.8 – 0.8 Prudent mortality assumptions are used that appropriately allow for future improvements in life expectancy. These assumptions are reviewed on a regular basis to ensure they remain appropriate. The Trustee uses the Club Vita Service to provide a better estimate of the mortality rates of the Total charge for defined benefit schemes 4.0 0.3 4.3 4.3 0.3 4.6 scheme’s membership than the standard tables. With effect from 1 June 2008, the scheme introduced a mortality risk sharing mechanism whereby Total charge for defined contribution schemes and personal pensions 8.4 8.7 17.1 8.0 7.8 15.8 members’ benefits for pensionable service after that date will be reduced if the life expectancy of the scheme’s members increases more quickly than a pre-determined rate. Balance sheet The amounts included in the balance sheet arising from the Group’s assets / (obligations) in respect of its defined benefit schemes was: Assumptions 2022 2021 Financial assumptions UK Other Total UK Other Total The principal assumptions used to determine the defined benefit obligations were: £m £m £m £m £m £m 2022 2021 Fair value of scheme assets 585.7 7.6 593.3 572.8 8.1 580.9 UK Other UK Other Present value of defined benefit obligations (560.8) (20.0) (580.8) (614.0) (22.6) (636.6) Discount rate 2.80% 1.79% 2.10% 0.90% Effect of asset ceiling / onerous liability (24.9) – (24.9) – – – Rate of increase in pensionable salaries Nil 3.10% Nil 2.50% | | | Retirement benefit obligations | | – (12.4) (12.4) (41.2) (14.5) (55.7) | | --- | --- | --- | --- | --- | | Rate of RPI inflation | 3.80% 2.03% 3.30% 1.66% | | | | | | | mount recognised on the balance shee | –liability – (12.7) (12.7) (41.2) (15.3) (56.5) | | | Rate of CPI inflation | 3.20% 2.03% 2.60% 1.66% | | | | | | | mount recognised on the balance shee | –asset – 0.3 0.3 – 0.8 0.8 | | Rate of pension increases RPI inflation capped at 5.0% p.a. 3.35% n/a 3.15% n/a RPI inflation capped at 2.5% p.a. 2.15% n/a 2.10% n/a 156 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 157 A A A t t Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued | 10 Retirement benefit obligations continued | | | | | | | | | | | | | | | | | | | | | | 10 Retirement benefit obligations continued | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | The other defined benefit schemes were: | | | | | | | | | | | | | | | | | | | | | | Movements in the effect of asset ceiling / onerous liability were: | | | | | | | | | | 2022 2021 | | | | | | | | | | | | | | | | | | | | | | 2022 2021 | | | | | | | | | | | | | Present value | | | | | | | | | | Present value | | | | | | | | | UK | Other | Total | UK | Other | Total | | | | Fair value | | | | of defined | | | Retirement | | | Fair value | | | | of defined | | | Retirement | | | | | £m | £m | £m | £m | £m | £m | | | | of scheme | | | | | benefit | | | benefit | | of scheme | | | | | benefit | | | benefit | | | | | | | | | | | | | | assets | | | obligations | | | obligations | | | | assets | | | obligations | | | obligations | | | t 1 April – – – 41.2 – 41.2 | | | | | | | | | | | | | £m | | | | £m | | | £m | | | £m | | | | £m | | | £m | | | | | | | | | Interest expense – – – 1.0 – 1.0 Germany’s defined benefit pension scheme – (8.5) (8.5) – (10.5) (10.5) Change in asset ceiling / onerous liability (excluding interest income) 24.9 – 24.9 (42.2) – (42.2) Republic of Ireland’s defined benefit pension scheme 7.6 (7.3) 0.3 8.1 (7.3) 0.8 | | | At 31 March | 24.9 – 24.9 – – – | | --- | --- | --- | --- | | France’s defined benefit retirement indemnity scheme | – (3.2) (3.2) – (3.7) (3.7) | | | | Italy’s defined benefit retirement indemnity scheme | – (1.0) (1.0) – (1.1) (1.1) | | | 11 Taxation Other 7.6 (20.0) (12.4) 8.1 (22.6) (14.5) Current and deferred tax are recognised in the income statement, except when they relate to items recognised directly in equity when the related tax is also recognised in equity. Movements in the present value of the defined benefit obligations in the year were: Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet 2022 2021 date, and any adjustment to tax payable in respect of previous years. | | UK | Other | Total | UK | Other | Total | | | --- | --- | --- | --- | --- | --- | --- | --- | | | £m | £m | £m | £m | £m | £m | The Group recognises deferred tax assets and liabilities based on estimates of future taxable income and recoverability. Deferred tax is provided | | t 1 April 614.0 22.6 636.6 536.5 20 5 557.0 | | | | | | | using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial | reporting purposes and the amounts used for taxation purposes. Current service cost 2.5 0.3 2.8 2.5 0 3 2.8 Past service cost – (0.1) (0.1) 0.2 (0.2) – The amount of deferred tax provided is calculated using tax rates enacted or substantively enacted at the balance sheet date that are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets are recognised to the extent that it is Interest expense 12.7 0.2 12.9 12.6 0 3 12.9 probable that future taxable profits will be available against which these temporary differences can be utilised. Insurance premiums for risk benefits (0.1) – (0.1) (0.1) – (0.1) Effect of changes in financial assump ions (54.0) (1.7) (55.7) 82.2 3.6 85.8 No deferred tax liabilities are recognised on the initial recognition of goodwill. However, when goodwill arises in a jurisdiction where it is deductible in determining taxable profit, the amortisation for tax purposes of goodwill creates a taxable temporary difference and this resulting deferred tax Effect of experience adjustments 3.1 (0.6) 2.5 – (0.1) (0.1) liability is recognised. Benefits paid (17.4) (0.5) (17.9) (19.9) (1.0) (20.9) The Group recognises a current tax provision when the Group has a present obligation as a result of a past event, and it is considered probable Exchange differences – (0.2) (0.2) – (0.8) (0.8) that there will be a future outflow of funds. As an international business, the Group is exposed to the income tax laws of the large number of At 31 March 560.8 20.0 580.8 614.0 22.6 636.6 jurisdictions in which it operates. These laws are complex and subject to different interpretations by taxpayers and tax authorities. The assessment Of the UK scheme’s present value of the defined benefit obligations, £66.0 million relates to active members, £240.0 million to vested deferred of uncertain tax positions is subjective. It is based on the Group’s interpretation of country-specific tax law and its application and interaction, on members and £254.8 million to retirees. previous experience and on management’s professional judgement supported by external advisors where necessary. Movements in the fair value of the schemes’ assets in the year were: The Group estimates a provision for uncertain tax positions by making judgements about the position likely to be taken by each tax authority. Where it is considered probable that the tax authority will accept the tax treatment used, or expected to be used, in the income tax return, the 2022 2021 accounts reflect the treatment in the return. Where it is not considered probable that the tax authority will accept the tax treatment, the tax amounts UK Other Total UK Other Total in the accounts reflect that uncertainty using either the most likely amount or the expected value amount depending on which method is expected £m £m £m £m £m £m to better reflect the resolution of that uncertainty. t 1 April 572.8 8.1 580.9 534.4 8 0 542.4 Provisions for uncertain tax positions are included within current tax liabilities. The Group’s uncertain tax positions principally relate to cross-border Interest income 12.0 0.1 12.1 12.8 0.1 12.9 transfer pricing. As at 31 March 2022, the total value of these tax provisions was £8.3 million (2020/21 restated: £7.8 million). It is poss ble that the Return on scheme assets (excluding interest income) (6.1) (0.4) (6.5) 20.4 0.6 21.0 amounts paid will be different from the amounts provided but this is not expected to be material. Contributions by company 25.3 0.4 25.7 26.0 0.7 26.7 Benefits paid (17.4) (0.5) (17.9) (19.9) (1.0) (20.9) Tax expense / (income) recognised in the income statement | dministra ive expenses (0.8) – (0.8) (0.8) – (0.8) | | 2022 | 2021 | | --- | --- | --- | --- | | | | £m | £m | | Insurance premiums for risk benefits | (0.1) – (0.1) (0.1) – (0.1) | | | Current tax Exchange differences – (0.1) (0.1) – (0.3) (0.3) Current tax on profits for he year 72.4 29.3 At 31 March 585.7 7.6 593.3 572.8 8.1 580.9 djustments for prior years (0.6) (0.2) The fair values of the schemes’ assets were: | | | | | | | | Total current tax | 71.8 29.1 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 2022 2021 | | | | | | | Deferred tax | | | | UK | Other | Total | UK | Other | Total | | | Origination and reversal of temporary differences (4.5) 7.3 £m £m £m £m £m £m Changes in tax rates and laws 4.9 – QIAIF (liability driven investment and credit portfolio of quoted assets) 400.0 – 400.0 434.4 – 434.4 djustments for prior years – (1.3) Quoted equi ies – 2.5 2.5 – 2 3 2.3 Total deferred tax 0.4 6.0 Quoted debt instruments 94.0 5.1 99.1 56.0 5 8 61.8 Income tax expense 72.2 35.1 | Unquoted debt instruments | 91.5 – 91.5 82.0 – 82.0 | | --- | --- | | Cash | 0.2 – 0.2 0.4 – 0.4 | | Total market value of scheme assets | 585.7 7.6 593.3 572.8 8.1 580.9 | The defined benefit schemes do not invest in the Company and no property or other assets owned by the schemes are used by the Group. The fair values of the unquoted debt instruments are determined by the fund managers using quoted prices for similar assets or other valuation techniques where all the inputs are directly observable or indirectly observable from market data. 158 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 159 A A A A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 11 Taxation continued 12 Earnings per share The income tax expense for the year can be reconciled to the profit per the income statement as follows: Basic earnings per share is calculated by dividing the profit for the year attr butable to owners of the Company by the weighted average number of shares in issue during the year excluding shares held by the EBT. 2022 2021 £m £m Diluted earnings per share is calculated by adjusting the weighted average number of shares to assume the conversion of all potentially dilutive | Profit before tax 302.2 160.6 | | ordinary shares. The share-based payment schemes which result in the issue of shares at a value below the market price of the shares are | | | | | | --- | --- | --- | --- | --- | --- | --- | | Expected tax charge at UK corporation tax rate of 19% (2021: 19%) 57.4 30.5 | | potentially dilutive. | | | | | | Recurring items | | | | 2022 | | 2021 | | | | | Number | | Number | | | Differences in overseas corporation tax rates | 8.7 5.6 | | | | | | Weighted average number of shares 470,552,792 453,851,022 Impact of tax losses (0.6) (1.7) Dilutive effect of share-based payments 2,669,271 2,069,427 | Items not taxable for tax purposes | (0.8) (0.5) | | | | --- | --- | --- | --- | | | | Diluted weighted average number of shares | 473,222,063 455,920,449 | | Items not deductible for tax purposes | 1.9 1.3 | | | | Other local taxes suffered overseas | 0.9 1.4 | | | Basic earnings per share 48.9p 27.7p Non-recurring items | | | Diluted earnings per share | 48.6p 27 5p | | --- | --- | --- | --- | | Changes in tax rates and laws | 4.9 – | | | | Movement in uncertain tax provisions in current year | 1.6 1.4 | | | 13 Dividends | Movement in uncertain tax provisions for prior years | (1.2) (1.4) | | | | | --- | --- | --- | --- | --- | | | | | 2022 | 2021 | | Prior year adjustments | (0.6) (1.5) | | £m | £m | | | 72.2 35.1 | Final dividend for the year ended 31 March 2021 – 9 8p (2020: nil p) 46.1 – | | | dditional interim dividend for the year ended 31 March 2020 to replace deferred final dividend – 9.5p – 42.6 The Group’s effective tax rate reflects the impact of higher tax rates in overseas jurisdictions where the Group earns profit. Based on current business plans, the mix of profits is not expected to change significantly in the future. Interim dividend for the year ended 31 March 2022 – 6.4p (2021: 6.1p) 30.1 28.6 76.2 71.2 In May 2021, the UK government enacted a change in the UK corporation tax rate from 19% to 25% effective from 1 April 2023 and so the UK deferred tax balances have been calculated at the new rate. The trustees of the EBT have waived their right to receive dividends and this rounds to £nil (2020/21: £nil). A proposed final dividend for the year ended 31 March 2022 of 11.6p is subject to approval by shareholders at the Annual General Meeting on Tax expense / (income) recognised directly in other comprehensive income 14 July 2022 and the estimated amount to be paid of £54.6 million has not been included as a liability in these accounts. 2022 2021 £m £m Relating to remeasurement of retirement benefit obligations 0.9 (4.3) Relating to movement in cash flow hedges 0.3 (1.0) 1.2 (5.3) Movement in deferred tax assets and liabilities Intangible assets (excluding goodwill), leases and Retirement Net tax property, plant benefit Employee Tax (liabilities) / and equipment Goodwill obligations benefits losses Other assets £m £m £m £m £m £m £m t 1 April 2020 (10 2) (50.6) 10.6 3 5 2.6 1 9 (42 2) 1 cquisi ions (restated ) (12 0) – – 0.1 0.4 – (11.5) (Charge) / credit to income (3.5) (0.2) (4.1) 0 8 0.7 0 3 (6.0) Recognised directly in equity – – 4.3 1 8 – 0.4 6.5 Transla ion differences 0.7 5.0 (0.1) (0.2) – (0.2) 5.2 1 t 31 March 2021 (restated ) (25 0) (45.8) 10.7 6 0 3.7 2.4 (48.0) Credit / (charge) to income 0.7 (0.1) (3.3) 2 9 (0.7) 0.1 (0.4) | Recognised directly in equity | | – – (5.2) 0 8 – (0.2) (4.6) | | --- | --- | --- | | Transla ion differences | (0.6) (2.3) – 0 2 – 0 2 (2.5) | | | At 31 March 2022 | (24.9) (48.2) 2.2 9.9 3.0 2.5 (55.5) | | Analysed in the balance sheet as: | 2022 | | 2021 | | | --- | --- | --- | --- | | | restated | | 1 | | £m | | £m | | Deferred tax assets 4.9 9.9 Deferred tax liabili ies (60.4) (57.9) (55.5) (48.0) 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). A deferred tax asset has been recognised for tax losses where current projections show that sufficient taxable profits will arise in the near future against which these losses may be offset. A deferred tax asset has not been recognised in respect of carry-forward tax losses where recoverability is uncertain totalling £1.6 million (2020/21: £2.0 million) which carries no expiry date. 160 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 161 A A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 14 Intangible assets 14 Intangible assets continued Goodwill represents the excess of the fair value of the consideration of an acquisition over the fair value attributed to the net assets acquired For the goodwill impairment reviews, the recoverable amount of the CGUs is based on value-in-use calculations, which use cash flow projections (including contingent liabilities). Goodwill is not amortised but is reviewed annually for impairment. Acquisition-related costs are charged to the based on the Group’s annual targets and strategic plan which cover the next five years. Judgements made are for the main assumptions used in income statement as incurred. determining the revenue and gross margin growth rates. These are determined using internal forecasts based upon historical growth rates and future medium-term plans together with relevant macroeconomic indicators. These cash flow projections are then extrapolated using the relevant Intang ble assets excluding goodwill are stated at cost, or fair value at the date of acquisition, less accumulated amortisation and any provisions long-term growth rate for the CGU and discounted at the Group’s pre-tax weighted average cost of capital (including lease liabilities) adjusted for for impairment. Residual value is reassessed annually. Expenditure on internally generated goodwill and brands is recognised in the income the estimated tax cash flows and risk applicable for the CGU. The cash flow projections are adjusted to take account of the likely future costs of statement as an expense as incurred. Amortisation is calculated to write off the cost on a straight-line basis at the following annual rates from the meeting our climate change commitments consistent with the Group’s climate scenario analysis of physical and transition risk impacts conducted date the assets are first available for use: software 9% – 50%; development expenditure 33%; brand 10%; customer contracts and relationships for the Task Force on Climate-related Financial Disclosures (TCFD). 10% – 14%; and acquired research 33%. For the Americas CGU, the long-term growth rate is 1.7% (2020/21: 1.9%) which is consistent with the market estimate of long-term average Customer | | | | | Development | | | contracts and | | Acquired | | | growth rates for the product and service solutions providers industries and does not exceed expected long-term GDP growth for Americas. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Goodwill | | Software | | expenditure | | Brand | relationships | | research | | Total | The pre-tax discount rate is 6.4% (2020/21: 7.5%). | | | £m | | £m | | £m | £m | | £m | | £m | £m | | For the EMEA CGU, the long-term growth rate is 1.5% (2020/21: 1.8%) which is consistent with the market estimate of long-term average growth Cost rates for the product and service solutions providers industries and does not exceed expected long-term GDP growth for EMEA. The pre-tax t 1 April 2020 241.1 289.7 – – 41.8 1.1 573.7 discount rate is 8.3% (2020/21: 8.5%). 1 cquisi ions (restated ) 97.6 6 0 – 4 0 43.6 – 151.2 There is significant headroom between the carrying amount and the value in use of the CGUs (over 100%), therefore the Directors believe that dditions – internally generated – 14 8 1.8 – – – 16.6 currently all reasonably l kely changes in the key assumptions referred to above would not give rise to an impairment charge. dditions – other – 13.6 – – – – 13.6 Disposals – (0.1) – – – – (0.1) 15 Property, plant and equipment Reclassifications – 1.4 – – – – 1.4 Property, plant and equipment are stated at cost less accumulated depreciation and any provisions for impairment after taking account of any Transla ion differences (21.1) (3.4) – – (0.3) – (24.8) impact of the Group’s strategy related to climate change. The cost of self-constructed assets includes the cost of materials, direct labour and 1 certain direct overheads. t 31 March 2021 (restated ) 317.6 322 0 1.8 4 0 85.1 1.1 731.6 dditions – internally generated – 7 0 – – – – 7.0 No depreciation has been charged on freehold land. Other assets are depreciated to residual value, which is reassessed annually, on a dditions – other – 17.7 – – – – 17.7 straight-line basis at the following annual rates: freehold buildings and improvements to leasehold buildings 2% (or the lease term if shorter); plant and machinery 5% – 20%; and computer equipment 20% – 33%. This reassessment includes consideration of the Group’s climate scenario Disposals – (22.2) – – – – (22.2) analysis of physical and transition risk impacts conducted for the TCFD. | Transla ion differences | 12.9 1.7 – – 1.2 – 15.8 | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Land and | | Plant and | | Computer | | | | At 31 March 2022 | 330.5 326.2 1.8 4.0 86.3 1.1 749.9 | buildings | | machinery | | equipment | | Total | | | | | £m | | £m | | £m | £m | Cost Amortisation t 1 April 2020 153 9 193.6 82 8 430.3 t 1 April 2020 – 235 9 – – 8.2 – 244.1 cquisitions 0 9 0.8 0.1 1.8 Charge for the year – 17 8 0.1 0.1 5.9 0.1 24.0 dditions 0.3 14.2 11.5 26.0 Transla ion differences – (2.9) – – – – (2.9) Disposals (0.3) (0.9) (0.9) (2.1) t 31 March 2021 – 250 8 0.1 0.1 14.1 0.1 265.2 Reclassifica ions 1.5 6.5 (9.4) (1.4) Charge for the year – 18 8 0.6 0.4 10.0 0.4 30.2 Transla ion differences (5.6) (5.4) (2.1) (13.1) Disposals – (20.1) – – – – (20.1) t 31 March 2021 150.7 208.8 82 0 441.5 Transla ion differences – 1 2 – – 0.1 – 1.3 dditions 3.7 16.1 1 0 20.8 | At 31 March 2022 | – 250.7 0.7 0.5 24.2 0.5 276.6 | | | | --- | --- | --- | --- | | | | Disposals | (0.5) (0.5) (21.2) (22.2) | | | | Transla ion differences | 1.7 1.7 0.6 4.0 | Net book value At 31 March 2022 155.6 226.1 62.4 444.1 At 31 March 2022 330.5 75.5 1.1 3.5 62.1 0.6 473.3 1 t 31 March 2021 (restated ) 317.6 71 2 1.7 3 9 71.0 1 0 466.4 Depreciation 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). t 1 April 2020 51.6 140.7 70 5 262.8 As at 31 March 2022, the cost and accumulated amortisation of internally generated intangible assets included in software were £33.9 million and Charge for he year 2.7 7.5 5.2 15.4 £17.8 million (2020/21: £28.3 million and £13.5 million) respectively. All development expenditure is internally generated. Disposals (0.3) (0.7) (0.9) (1.9) At 31 March 2022, there were no material individual software assets (2020/21: the RS SAP system with a net book value of £12.6 million). Material Reclassifica ions 0.4 (0.5) 0.1 – individual customer contracts and relationships are from the acquisitions of IESA, Needlers and Synovos with net book values of £24.2 million, Transla ion differences (1.4) (2.5) (1.1) (5.0) 1 £14.7 million and £21.2 million respectively (2020/21 restated : £28.6 million, £16.5 million and £23.6 million) and remaining useful lives of 3 to t 31 March 2021 53 0 144.5 73 8 271.3 6 years, 8 years and 6 years respectively. Charge for he year 3 2 8.2 4.4 15.8 Goodwill is allocated at acquisition to the cash generating units (CGUs) that are expected to benefit from the synergies arising as a result of the Disposals (0.5) (0.5) (20.9) (21.9) 1 acquisition, with £280.7 million (2020/21 restated : £267.8 million) relating to the Americas CGU and £49.8 million (2020/21: £49.8 million) relating Transla ion differences 0 3 0.7 0.6 1.6 to the EMEA CGU. At 31 March 2022 56.0 152.9 57.9 266.8 The Group reviews its intang ble assets regularly to assess if there are any indications the assets may be impaired. In addition, goodwill and any other intangible assets that are not yet being amortised are subject to annual impairment reviews. Net book value An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its recoverable amount. The recoverable amount At 31 March 2022 99.6 73.2 4.5 177.3 is calculated as the higher of fair value less costs of disposal and value in use. For an asset that does not generate largely independent cash flows, t 31 March 2021 97.7 64.3 8 2 170.2 the recoverable amount is determined for the CGU to which the asset belongs. Included above are £8.8 million of property, plant and equipment under construction at 31 March 2022 (2020/21: £34.1 million). Finance costs capitalised were £0.5 million (2020/21: £0.9 million) calculated using a capitalisation rate of 2.2% (2020/21: 2.2%). 162 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 163 A A A A A A A A A A A A A A A A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 16 Leases 16 Leases continued The Group assesses at the inception of a contract whether the contract is, or contains, a lease. Where it conveys the right to control the use of an The total cash outflow for leases was: identified asset for a period of time in exchange for consideration, the contract is deemed to be, or to include, a lease. The Group leases various 2022 2021 properties, plant and machinery, computer equipment and vehicles typically for periods between 2 and 10 years. Where a contract includes a £m £m vehicle lease, the Group has elected to account for the non-lease components as part of the lease. Extension and termination options are included Included in cash flows from operating ac ivities: in some leases. Where the Group determines, at the commencement date of each lease, that it is reasonably certain to exercise an option to Interest expense 0.9 1.0 extend the lease or not to exercise an option to terminate the lease, the additional period is included within the lease term. Expense rela ing to short-term leases 0.8 0.5 Leases are recognised on the balance sheet at their commencement date as a liability representing the present value of the future lease payments Expense rela ing to leases of low-value assets, excluding short-term leases of low-value assets 0.5 0.5 not yet paid and a right-of-use asset reflecting the future benefit to the Group generated by using the underlying asset. The discount on the lease Expense rela ing to variable lease payments not included in measurement of lease liabilities 0.6 1.0 liability is calculated using the Group’s incremental borrowing rate, as rates implicit in the Group’s leases cannot be readily determined, and is charged to finance costs in the income statement as it unwinds. The Group’s incremental borrowing rate is adjusted to take account of the country Included in cash flows from financing activities: risk, lease term and start date for each lease. Fixed payments less any lease incentives receivable, in-substance fixed payments and variable Payment of lease liabilities 17.8 16.4 payments based on an index or rate form part of the lease liability. Variable payments which are not based on an index or rate are expensed when Total cash outflow for leases 20.6 19.4 the event that triggers the payment occurs. The contractual maturity analysis of lease liabilities is included in liquidity risk in Note 23. The right-of-use asset is stated at cost less accumulated depreciation and any provisions for impairment. Initially the cost of the right-of-use asset comprises the initial amount of the lease liability adjusted for any lease payments made at or before commencement of the lease less any lease 17 Investment in joint venture incentives received, plus any direct costs incurred and an estimate of the cost to restore the underlying asset. The right-of-use asset is depreciated The Group’s share of the post-tax profit of its joint venture is included in profit before tax. The investment in the joint venture is carried in the Group on a straight-line basis over the lease term (or useful life of the asset, if shorter), which is reassessed as the underlying facts and circumstances of balance sheet at historical cost plus post-acquisition changes in the Group’s share of the joint venture’s net assets. The Group owns 50% of the the lease change. share capital of RS Components & Controls (India) Limited, its joint venture. The Group has elected to not recognise the lease liability and right-of-use asset in respect of short-term leases and leases of low-value assets 2022 2021 on the balance sheet. Short-term leases and leases of low-value assets are expensed in the income statement on a straight-line basis over the £m £m lease term. t 1 April 1.1 1.0 The lease liability is remeasured when there is a change in the future lease payments or if the Group changes its assessment of whether it will Group’s share of profit for the year 0.5 0.2 exercise an extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the Group’s share of o her comprehensive expense 0.1 (0.1) carrying value of the right-of-use asset. If the carrying value of the right-of-use asset is reduced to zero, any further reductions are recognised in Group’s share of total comprehensive income 0.6 0.1 the income statement. Dividends (0.2) – The amounts recognised relating to leases were: | | | At 31 March | 1.5 1.1 | | --- | --- | --- | --- | | 2022 | 2021 | | | | £m | £m | | | 18 Inventories Right-of-use assets Inventories are valued at the lower of cost and net realisable value. Cost is calculated on a weighted average basis and for finished goods and Buildings 33.8 39.6 goods for resale includes attributable overheads. Plant and machinery 0.3 0.7 The Group estimates the net realisable value of inventories in order to determine the value of any provision required. In this estimation judgements, Computer equipment 6.4 12.2 including any impact of obsolescence including that related to regulatory changes due to amongst other things climate change, are made in Vehicles 5.3 6.1 relation to the number of years of sales there are in inventories of each product and the value recoverable from those inventories. The Group | Right-of-use assets | 45.8 58.6 | bases its estimates on recent historical experience and knowledge of the products on hand. | | | | --- | --- | --- | --- | --- | | | | | 2022 | 2021 | | | | | £m | £m | Lease liabilities | Current | 16.7 17.4 | Raw materials and consumables 66.4 69.1 | | | --- | --- | --- | --- | | Non-current | 32.0 44.1 | Finished goods and goods for resale 492.8 391.3 | | | Lease liabilities | 48.7 61.5 | Gross inventories | 559.2 460.4 | Inventory provisions (29.7) (40.6) Depreciation charge for right-of-use assets Net inventories 529.5 419.8 Buildings 9.2 9.4 £7.7 million was recognised as an expense relating to the write-down of inventories to net realisable value (2020/21: £21.1 million including Plant and machinery 0.4 0.5 £12.7 million related to personal protective equipment (PPE) products bought at the start of the COVID-19 pandemic as a result of their significant Computer equipment 5.4 4.3 decline in selling price). Vehicles 2.7 2.9 If the numbers of each product sold in a year decreased leading to an increase of one year in the number of years of sales there are in inventory, Depreciation charge for right-of-use assets 17.7 17.1 inventory provisions would increase by £1.5 million (2020/21: £2.0 million). A reduction in the value recoverable leading to an increase in provision rates of 10 percentage points per product, up to a maximum of 100% provision per product, would increase the inventory provisions by £1.2 million (2020/21: £1.5 million). Therefore, currently the Group does not expect any reasonably l kely changes, including regulatory changes and any Right-of-use assets acquired with businesses – 6.6 further impacts of the COVID-19 pandemic and any future variants, to have a material impact on the net realisable value of inventories. Other additions to right-of-use assets 2.8 11.9 Additions to right-of-use assets 2.8 18.5 164 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 165 A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 19 Trade and other receivables 21 Financial instruments 2022 2021 The Group uses derivative financial instruments to cover its exposure to foreign exchange and interest rate risks arising from operational and restated 1 £m £m financing activities. It principally employs forward foreign exchange contracts, and occasionally currency swaps, to hedge against changes in exchange rates over fixed terms of between three and seven months for the majority of its operating companies. In addition, there are some Current interest rate swaps which swap US dollar fixed rate private placement loan notes into floating US dollars. Gross trade receivables 535.8 435.2 In accordance with its treasury policies, the Group designates the majority of its derivative financial instruments as cash flow hedges, fair value Impairment allowance (Note 23) (9.1) (7.4) hedges or net investment hedges. The Group does not hold or issue derivative financial instruments for trading purposes. Net trade receivables 526.7 427.8 Derivatives are recognised at fair value. Derivative financial instruments that do not qualify for cash flow hedge or net investment hedge accounting Amounts owed by joint venture 2.1 1.8 are classified as measured at fair value through profit or loss and changes in their fair values are recognised in the income statement as they arise. Prepayments 27.3 24.9 Other taxation and social security 1.8 – Cash flow hedge accounting Contract assets 2.9 4.4 The Group uses derivative financial instruments, namely forward foreign exchange contracts, to hedge variability in cash flows of a recognised Other receivables 33.5 34.7 asset or liability, or a highly probable forecast transaction. The effective part of any gain or loss on the derivative financial instrument is recognised Current trade and other receivables 594.3 493.6 in other comprehensive income, while any ineffective part is recognised immediately in the income statement. When the hedged item subsequently results in the recognition of a non-financial asset or liability (e.g. inventories) the associated cumulative gain or loss recognised in the Non-current hedging reserve is transferred to the initial carrying amount of the asset or liability. When the hedged item subsequently results in the recognition of Prepayments 0.7 0.7 a financial asset or liability, the associated cumulative gain or loss that was recognised in other comprehensive income is reclassified from equity Other taxation and social security 1.2 1.1 to the income statement in the same period that the hedged item affects the income statement. Other receivables 1.1 1.1 When a hedging instrument expires or is sold, terminated or exercised, or the Group revokes designation of the hedge relationship as it no longer Non-current other receivables 3.0 2.9 meets the Group’s risk management objective but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). point remains in equity and is reclassified from equity when the transaction occurs in accordance with the above policy. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is reclassified to the income statement. Trade receivables include £nil (2020/21: £0.7 million) which was subject to a factoring arrangement operated by one of the Group’s recent acquisitions which was fully unwound during the year. Under this arrangement, the relevant receivables were transferred to the factor in The fair value of forward foreign exchange contracts is the difference between their discounted contractual forward price and their current exchange for cash and the Group was prevented from selling or pledging the receivables. However, the Group retained late payment and credit forward price. risk. The Group therefore continued to recognise the transferred assets in their entirety in its balance sheet. The amount repayable under the factoring agreement was presented as a secured loan (Note 22). The Group considered that the held to collect business model was appropriate Fair value hedge accounting for these receivables, and so measured them at amortised cost. The Group uses derivative financial instruments, namely interest rate swaps, to hedge exposure to interest rate risks arising from financing activities. The fair value of the swaps is the market value of the swap at the balance sheet date, taking into account current interest rates. Changes Contract assets relate mainly to licence fee income and are where the Group has performed its part of the contract but is yet to receive the credit in fair values of derivatives designated as fair value hedges and changes in fair value of the related hedged items are recognised directly in the note for licence fee income from suppliers or raise the invoice for other contracts with customers. income statement. Other receivables include £19.8 million (2020/21: £23.0 million) for amounts yet to be invoiced to customers related to product sales where the Group acts as an agent (Note 5). Net investment hedge accounting The portion of the gain or loss on an instrument used to hedge a net investment in a foreign operation that is determined to be an effective hedge 20 Trade and other payables is recognised in other comprehensive income. The ineffective portion is recognised immediately in the income statement. Amounts taken to other 2022 2021 comprehensive income are reclassified from equity to the income statement when the foreign operations are sold or liquidated. £m £m Current Other financial instruments Trade payables 377.3 319.4 All other financial instruments are initially recognised at fair value plus transaction costs. Initial fair value is generally the transaction price. Other taxation and social security 19.7 19.4 Subsequent measurement is as follows: Government grants 0.1 0.1 • Borrowings are measured at amortised cost unless they are designated as being fair value hedged, in which case they are remeasured for the fair value changes in respect of the hedged risk with these changes recognised in the income statement. Cash-settled share-based payment liability 3.2 3.0 • All other financial assets, including current receivables, are measured at amortised cost less any impairment allowances. Accruals 150.4 111.0 • All other financial liabilities, including current payables, are measured at amortised cost. Contract liabilities 8.2 0.6 Other payables (including estimated obligations for customer volume discounts and refunds – Note 5) 25.2 21.8 Other derivatives | Current trade and other payables | | 584.1 475.3 | 2022 2021 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Non-current | | | | Current | | Current | | Current | | Current | | | | | | | assets | | liabilities | | assets | | liabilities | | | | Government grants 2.5 2.6 | | | | £m | | £m | | £m | | £m | | | Cash-settled share-based payment liability | 2.6 2.6 | | | | | | | | | | Forward foreign exchange contracts designated as cash flow hedges (principal amount £148.9 million | | Other employee benefits | 1.8 1.6 | (2020/21: £130.4 million)) | 1.2 (1.9) 1.8 (0.8) | | --- | --- | --- | --- | --- | | Non-current other payables | | 6.9 6.8 | Forward foreign exchange contracts classified as fair value through profit or loss 0.2 (1.3) 0.4 (1.2) | | | | | | Other derivatives | 1.4 (3.2) 2.2 (2.0) | Contract liabilities are where the Group has received payment but is yet to perform its part of the contract. The increase in the year is mainly related to higher advance orders and the related payments in advance as customers anticipated long lead times and potential price increases. Government grants related to expenditure on property, plant and equipment are credited to the income statement at the same rate as the depreciation on the asset to which the grant relates. The Group offers a supply chain finance facility to its suppliers. It is primarily provided to enable working capital improvement through the extension of supplier payment terms and gives the suppliers the option to protect their own working capital position from the impact of this extension. The substance of the contractual terms with the bank providing the financing does not differ to the terms under the supplier contracts and there are no changes to the invoice terms and therefore the amount owed to the bank of £10.7 million (2020/21: £5.3 million) is included in trade payables. Related cash flows are included in cash generated from operations. 166 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 167 Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 21 Financial instruments continued 22 Net debt Fair values Net debt comprises cash and cash equivalents, borrowings, interest rate swaps and lease liabilities. Cash and cash equivalents comprise cash Under IFRS 7 ‘Financial Instruments: Disclosures’, fair values are measured using a hierarchy where the inputs are: in hand and in current accounts, overnight deposits and short-term deposits net of overdrafts with qualifying financial institutions. Borrowings • Level 1 – quoted prices in active markets for identical assets or liabilities represent loans from qualifying financial institutions. • Level 2 – not Level 1 but are observable for that asset or liability either directly or indirectly 2022 2021 • Level 3 – not based on observable market data (unobservable) £m £m The other derivatives listed above, the interest rate swaps and the fair value of the private placement loan notes they are hedging are measured at Cash and short-term deposits 257.9 197.9 fair value using Level 2 inputs. These are estimated by discounting the future contractual cash flows using appropriate market-sourced data at the Bank overdrafts (99.5) (111.5) balance sheet date. Cash and cash equivalents 158.4 86.4 For all financial assets and liabilities, fair value approximates the carrying amounts in the balance sheet except for the following: | 2022 2021 | | | | | | | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | | £m | £m | | | Carrying | | | | Carrying | | | | | | | | | amounts | | Fair value | | amounts | | Fair value | | Non-current borrowings | | | | | | £m | | £m | | £m | | £m | | | | Unsecured private placement loan notes repayable after more than five years (75.5) (147.3) Non-current private placement loan notes (151.7) (144.8) (147.3) (146.1) Unsecured private placement loan notes repayable from four to five years (76.2) – The fair values are calculated using Level 2 inputs by discounting future cash flows to net present values using prevailing interest rate curves and Non-current borrowings (151.7) (147.3) the Group’s credit margin. Current other borrowings Secured bank loans – (0.7) Netting arrangements for financial instruments Current other borrowings – (0.7) The Group operates a number of cash pooling arrangements to provide the benefits of settling interest on a net basis. The balances on these Total borrowings (151.7) (148.0) accounts do not meet the criteria for offsetting and so are not presented on a net basis in the balance sheet. Where a legal right of offset exists, | these are shown in the table below along with any financial instruments which can be netted under master netting arrangements. | | | | | | | | | Non-current interest rate swaps designated as fair value hedges – 1.1 | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | | | | | | Current interest rate swaps designated as fair value hedges – assets | 0.1 – | | | Gross and net | | | | Financial | | | | | | | | | amounts in | | | instruments | | | Net | Current interest rate swaps designated as fair value hedges – liabilities | (0.2) – | | | balance sheet | | | | not offset | | amounts | | | | | | | | | £m | | £m | | £m | Cash and cash equivalents | 158.4 86.4 | | At 31 March 2022 | | | | | | | | | Non-current lease liabilities | (32.0) (44.1) | | Interest rate swaps assets 0.1 (0.1) – | | | | | | | | | Current lease liabilities | (16.7) (17.4) | | Cash and cash equivalents – cash and short-term deposits | | | 257.9 (95.5) 162.4 | | | | | | Net debt | (42.1) (122.0) | | Other deriva ive assets | | | | 1.4 (1.4) – | | | | | | | The secured bank loans at 31 March 2021 related to transferred receivables (Note 19). Interest rate swaps liabilities (0.2) – (0.2) The interest rate swaps are designated as fair value hedges and swap US$50 million of private placement loan notes from fixed rate US dollars at Cash and cash equivalents – bank overdrafts (99.5) 95.5 (4.0) 3.37% into floating rate US dollars at US$ LIBOR plus 191 basis points maturing December 2022 and swap US$35 million of private placement Other deriva ive liabili ies (3.2) 1.5 (1.7) loan notes from fixed rate US dollars at 3.58% into floating rate US dollars at US$ LIBOR plus 277 basis points maturing March 2023. As US$ | At 31 March 2021 | LIBOR rates will continue to be published until June 2023, these swap contracts do not need amending. Further details of these swaps and the | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Interest rate swaps 1.1 (0.4) 0.7 | hedged items are: | | | | | | | | | | | Cash and cash equivalents – cash and short-term deposits 197.9 (107.0) 90.9 | | 2022 2021 | | | | | | | | | | Other deriva ive assets 2.2 (0.9) 1.3 | | | | | | Private | | | | Private | | | | | | | placement | | | | placement | | | Cash and cash equivalents – bank overdrafts (111.5) 107 0 (4.5) | | | Interest rate | | loan notes | | Interest rate | | loan notes | | | | | | | swaps | | hedged | | swaps | | hedged | Other deriva ive liabili ies (2.0) 1 3 (0.7) £m £m £m £m Carrying amount of (liability) / asset (0.1) (64.6) 1.1 (62.8) ccumulated fair value adjustments (loss) / gain (0.1) 0.1 1.1 (1.1) (Loss) / gain in fair value in year (1.2) 1.2 0.1 (0.1) 168 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 169 A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued | 22 Net debt continued | | | | | | | | | | | | | | | 23 Financial risk management continued | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | Movements in net debt were: | | | | | | | | | | | | | | | The ageing of net trade receivables at the reporting date was: | | | | | | | | | Total liabilities | | | | | | Cash and | | | | | 2022 | 2021 | | | | | Lease | | from financing | | | | Interest | | | cash | | | | £m | £m | | | Borrowings | | liabilities | | | activities | | rates swaps | | | equivalents | | Net debt | | | | | | | | £m | | £m | | | £m | | | £m | | £m | | £m | Not past due 437.9 355.4 | | | | Net debt at 1 April 2020 (169.3) (56 3) (225.6) 1.0 34 8 (189.8) | | | | | | | | | | | | | | | Past due 0-30 days 59.9 49.6 | | | | Cash flows 24 3 16.4 40.7 – 63.4 104.1 | | | | | | | | | | | | | | | Past due 31-60 days | 10.1 9.5 | | | cquired wi h businesses (16.9) (6.9) (23.8) – – (23.8) | | | | | | | | | | | | | | | Past due 61-120 days | 8.2 5.1 | | | New leases – (11.9) (11.9) – – (11.9) | | | | | | | | | | | | | | | Past due over 120 days | 10.6 8.2 | | | Lease modifications – (3.7) (3.7) – – (3.7) | | | | | | | | | | | | | | | Total | 526.7 427.8 | | Disposal of leases – 0.4 0.4 – – 0.4 The movement in the impairment allowance for trade receivables was as follows: (Loss) / gain in fair value in year (0.1) – (0.1) 0.1 – – | | | | 2022 | 2021 | | --- | --- | --- | --- | --- | | Transla ion differences 14 0 0.5 14 5 – (11.8) 2.7 | | | £m | £m | | Net debt at 31 March 2021 (148.0) (61 5) (209.5) 1.1 86.4 (122.0) | | t 1 April (7.4) (6.9) | | | | Cash flows 0.7 17.8 18 5 – 68.1 86.6 | | cquisitions – (0.7) | | | | New leases | – (2.8) (2.8) – – (2.8) | Net remeasurement of impairment allowance | (1.7) 0.2 | | | Lease modifications | – (2.1) (2.1) – – (2.1) | At 31 March | (9.1) (7.4) | | | Disposal of leases | – 0.2 0 2 – – 0.2 | | | | Trade receivables are written off when there is no reasonable expectation of recovery, for example when a customer enters liquidation or the Gain / (loss) in fair value in year 1 2 – 1 2 (1.2) – – Group agrees with the customer to write off an outstanding invoice. The Group continues to limit its exposure by maintaining tight credit policies, Transla ion differences (5.6) (0.3) (5.9) – 3 9 (2.0) including short payment terms and low credit limits for new customers and seeking payment commitments for overdue balances before releasing Net debt at 31 March 2022 (151.7) (48.7) (200.4) (0.1) 158.4 (42.1) new orders to existing customers. Historically, the Group has generally experienced very low levels of trade receivables not being recovered, including those significantly past due, and this was also the case during 2021/22. However, with the continued uncertainty about the global economy, the Group remains cautious about its exposure and so has carefully reviewed, and maintained at a higher level, its expected loss rates 23 Financial risk management for those markets and industries that are most affected. The principal financial risks to which the Group is exposed are those of credit, liquidity and market. Market risk includes interest rate risk and foreign currency transaction risk. Each of these is managed in accordance with Board-approved policies. At 31 March 2022, the largest trade receivable balance was £8.7 million (2020/21: £7.0 million), of which £6.4 million has been received since the year end. The maximum exposure with a single bank for deposits was £51.3 million (2020/21: £19.4 million) and the largest mark to market Credit risk exposure for derivative financial instruments to a single bank was £0.1 million (2020/21: £0.6 million). The Group also occasionally uses money The Group is exposed to credit risk on financial assets such as cash deposits, derivative instruments and trade and other receivables. market funds to invest surplus cash thereby diversifying credit risk and at 31 March 2022 its exposure to these funds was £nil (2020/21: £nil). The amounts in the balance sheet represent the maximum credit risk exposure at the balance sheet date. There were no significant concentrations Liquidity risk of credit risk at the balance sheet date, as exposure is spread over a large number of counterparties, customers and geographic locations. The Group’s key priority is to ensure that it can meet its liabilities as they fall due. The Group ensures this by having sufficient committed debt The Group has reviewed its credit risk again carefully this year due to the continued COVID-19 pandemic and its variants and the Group does facilities in place to meet its anticipated funding requirements. The Group’s forecast funding requirements and its committed debt facilities are not believe it has materially altered during the year. reported to and monitored by the Treasury Committee monthly. For cash deposits and derivative instruments, the Group identifies counterparties of suitable creditworthiness based on ratings assigned by During the year, the Group moved its £300.0 million revolving credit facility to a sustainability-linked loan, replaced LIBOR with risk free rates and international credit-rating agencies and has procedures to ensure that only these parties are used, that exposure limits are set based on the extended its maturity for a year. Therefore, as at 31 March 2022, the Group had the following committed debt finance in place: external credit ratings and that these limits are not exceeded. The impairment losses on these are immaterial. • Private placement loan notes of €18 million with a maturity of October 2026, US$80 million with a maturity of December 2026, €13 million with For trade and other receivables, all operating companies have credit policies and monitor their credit exposure on an ongoing basis. Each a maturity of October 2029, US$35 million with a maturity of March 2030 and US$50 million with a maturity of October 2031. operating company performs credit evaluations on all customers seeking credit over a certain amount. For countries with no local operating • A £300.0 million sustainability-linked loan, with a lender option accordion of up to a further £100.0 million, which has a maturity of November company presence, export credit limits are set and monitored on a country basis monthly by the Treasury Committee. The impairment losses 2024 with an option for the Group to extend for up to one further one-year term subject to individual lender approval. This is an undrawn revolving on contract assets and other receivables are immaterial. credit facility. The impairment allowance for trade receivables is measured at an amount equal to lifetime expected credit losses. Trade receivables have been As at 31 March 2022, the Group had £300.0 million (2020/21: £300.0 million) of available undrawn committed debt facilities in respect of which all grouped based on shared credit risk characteristics and the number of days from date of invoice. The expected loss rates are based on the conditions precedent had been met. payment profile of sales over a 36-month period from 1 April 2018 and the corresponding historical credit losses experienced within this period The Group also uses bank overdrafts, uncommitted short-term money market loans, cash and short-term investments. The main purpose of these calculated as the trade receivables from this period that have not been paid by the year end. The historical loss rates are adjusted to reflect current financial instruments is to manage the Group’s day-to-day funding and liquidity requirements. and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables. On that basis, the impairment allowance for trade receivables was determined as follows: 2022 2021 Gross Gross Expected carrying Loss Expected carrying Loss loss rate amount allowance loss rate amount allowance % £m £m % £m £m 0-30 days from date of invoice 0.6% 358.3 2.2 0.8% 289.1 2.2 31-60 days from date of invoice 0.9% 117.4 1.1 1.2% 97 3 1.2 | 61-90 days from date of invoice | 2.1% 28.6 0.6 2.0% 24 9 0.5 | | | --- | --- | --- | | 91-120 days from date of invoice | 3.3% 12.0 0.4 6.1% 8 2 0.5 | | | Over 120 days from date of invoice | 24.6% 19.5 4.8 19.1% 15.7 3.0 | | | Total | | 535.8 9.1 435 2 7.4 | 170 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 171 A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 23 Financial risk management continued 23 Financial risk management continued The contractual maturities of financial liabilities, including contractual future interest payments were: Market risk – foreign currency transaction risk The Group is exposed to foreign currency transaction risk as it has operating companies with payables and receivables in currencies other than | Carrying | | Contractual | | Within | | 1-2 | 2-3 | 3-4 | After 4 | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | amounts | | cash flows | | 1 year | | years | years | years | years | | their functional currency. The Group also has foreign currency translation risk resulting from investment in foreign subsidiaries and foreign currency | | | £m | | £m | | £m | £m | £m | £m | | £m | | debt which is mainly in US dollars with some euros. Derivative financial liabilities Hedging of currency exposures during periods when operating companies cannot easily change their selling prices is implemented in order to Inflows for forward foreign exchange contracts 133.9 133.6 133.6 – – – – shelter the forecast gross profit during those periods. In this way the impacts of currency fluctuations can be smoothed until selling prices can Outflows for forward foreign exchange contracts (137.1) (137.1) (137.1) – – – – be changed in the light of movements in exchange rates. The hedges are enacted through forward foreign exchange contracts in appropriate Forward foreign exchange contracts (3.2) (3.5) (3.5) – – – – currencies entered into by Group Treasury based on trading projections provided by the operating companies. The Group’s largest exposures relate to euros and US dollars. Non-derivative financial liabilities Private placement loan notes (151.7) (185.6) (4.7) (4.7) (4.7) (4.7) (166.8) In addition, specific cash flows relating to material transactions in currencies other than the functional currency of the local business are hedged when the commitment is made. Lease liabili ies (48.7) (50.7) (17.7) (11.4) (7.3) (5.7) (8.6) Bank overdrafts (99.5) (99.5) (99.5) – – – – The Group classifies forward foreign exchange contracts as hedging instruments against forecast receivables / payables and designates the Trade payables, other payables and accruals (500.2) (500.2) (500.2) – – – – forward element of these contracts as cash flow hedges for accounting purposes on a 1:1 basis which means the fair value movement in the hedged item is equal and opposite to the fair value movement in the hedging instrument. The forecast cash flows are expected to occur evenly At 31 March 2022 (803.3) (839.5) (625.6) (16.1) (12.0) (10.4) (175.4) throughout the forecast period from the year end, which is between three and seven months, and will affect the income statement in the period in which they occur or the inventories are sold. The average forward prices of the outstanding forward foreign exchange contracts are €1.20:£1 and | | Carrying | | Contractual | | Within | | 1-2 | 2-3 | 3-4 | After 4 | | US$1.34:£1. | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | amounts | | cash flows | | 1 year | | years | years | years | years | | | | | | £m | | £m | | £m | £m | £m | £m | | £m | Foreign currency transaction exposures, and the hedges in place to mitigate them, are monitored monthly by the Treasury Committee. The Group | | Derivative financial liabilities | | | | | | | | | | | | does not believe its foreign currency transaction risk has altered materially during the year. Ineffectiveness may arise if actual foreign currency | transactions are lower than the trading projections. Inflows for forward foreign exchange contracts 67.0 66 9 66.9 – – – – Outflows for forward foreign exchange contracts (69.0) (69.0) (69.0) – – – – The Group has designated US$3.6 million (2020/21: US$3.6 million) of the private placement loan notes maturing in December 2026, with a carrying amount of £2.8 million (2020/21: £2.6 million), as hedges of US$3.6 million (2020/21: US$3.6 million) of net investments in its US Forward foreign exchange contracts (2.0) (2.1) (2.1) – – – – subsidiaries. These hedges are expected to remain highly effective as the change in the value of the net assets of the US subsidiaries hedged is Non-derivative financial liabilities always exactly offset by the related change in the fair value of the private placement loan notes. No other foreign currency translation exposures Secured bank loans (0.7) (0.7) (0.7) – – – – are explicitly hedged although local currency debt is used where economically and fiscally efficient in the financing of subsidiaries and this provides Private placement loan notes (147 3) (183.1) (4 5) (4.5) (4.5) (4.5) (165.1) a degree of natural hedging. Guidelines are in place to manage the currency mix of the Group’s net debt. The Group does not believe its foreign Lease liabili ies (61.5) (63.9) (18 3) (15.9) (10.6) (6.5) (12.6) currency translation risk has altered materially during the year. The balance in the cumulative translation reserve relating to the US$3.6 million net investment hedge is £nil with a further loss of £38.4 million relating to previous net investment hedging relationships. Bank overdrafts (111 5) (111.5) (111 5) – – – – Trade payables, other payables and accruals (412 8) (412.8) (412 8) – – – – Borrowings are analysed by currency as: At 31 March 2021 (735.8) (774.1) (549.9) (20.4) (15.1) (11.0) (177.7) Unsecured Unsecured Secured private bank bank placement Market risk – interest rate risk overdrafts loans loan notes Total £m £m £m £m The Group has relatively high interest cover and therefore the Group adopts a policy of paying and receiving most of its interest on a variable interest rate basis, as in the opinion of the Group this minimises interest cost over time. This policy is subject to regular monitoring of the effect of At 31 March 2022 potential changes in interest rates on its interest cost with a view to taking suitable actions should exposure reach certain levels. The Group does Sterling (78.8) – – (78.8) not believe its interest rate risk has materially altered during the year. US dollar (3.0) – (125.5) (128.5) As at 31 March 2022 (and 31 March 2021), the Group had US$165 million and €31 million of private placement loan notes at fixed interest rates, of Euro (8.4) – (26.2) (34.6) which it had swapped US$85 million into floating interest rates. All other borrowings were at variable rates. At 31 March 2022, 35% (2020/21: 33%) Canadian dollar (8.3) – – (8.3) of the Group’s gross borrowings excluding lease liabilities (total borrowings plus bank overdrafts) was at fixed rates, with surplus cash deposited at Other (1.0) – – (1.0) variable rates. Total borrowings (99.5) – (151.7) (251.2) The Group has completed its transition to alternative benchmark rates arising as a result of the global financial regulators’ interest rate benchmark reform and so, as at 31 March 2022, has no remaining risks due to this transition. This transition has resulted in no changes to the Group’s risk At 31 March 2021 management strategy. Sterling (96.5) (0.7) – (97.2) US dollar (4.4) – (120.9) (125.3) Euro (5.0) – (26.4) (31.4) Other (5.6) – – (5.6) Total borrowings (111.5) (0.7) (147.3) (259.5) 172 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 173 Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued 23 Financial risk management continued 25 Share capital and share premium account Share Share Sensitivity analysis of exposure to interest rates and foreign exchange rates Number of capital premium The sensitivity analysis is based on the following: shares £m £m • Change of one percentage point in market interest rates affecting all variable rate elements of financial instruments. Issued and fully paid ordinary shares of 10p each: • Change of 5% in euro and US dollar exchange rates affecting the fair value of derivative financial instruments designated as hedging instruments t 1 April 2020 446,308,426 44.6 51.4 and other financial assets and liabilities. The transactional foreign exchange effect in equity due to net investment hedges included below would Issues to settle employee share awards 1,816,755 0.2 3.2 be offset in full by the translation of the US and European subsidiaries. Share placing 21,818,181 2.2 177.8 2022 2021 Transaction costs on share placing – – (3.9) | Impact on | | | | | Impact on | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | income | | | Impact | | income | | | Impact | | t 31 March 2021 469,943,362 47.0 228.5 | | | statement | | on equity | | | statement | | on equity | | | | | | gain / (loss) | | gain / (loss) | | | gain / (loss) | | gain / (loss) | | | Issues to settle employee share awards 1,078,660 0.1 2.9 | | | | £m | | | £m | | £m | | | £m | | | | | | | | | | | | | | At 31 March 2022 | 471,022,022 47.1 231.4 | One percentage point increase in interest rates 0.7 – 0 2 – The share placing in 2020/21 was primarily to fund acquisitions. 5% weakening of he euro 2.3 0.6 1 0 – 5% weakening of he US dollar (0.1) (2.3) 1.4 (2.7) The EBT buys shares on the open market and holds them in trust for employees participating in the Group’s share-based payment schemes. At 31 March 2022, the EBT held 315,768 shares (2020/21: 168,214 shares) which had not yet vested unconditionally with employees. A corresponding decrease in interest rates or strengthening of exchange rates would result in an equal and opposite effect to the amounts above. 26 Capital commitments Capital management As at 31 March 2022, the Group is contractually committed to, but has not provided for, future capital expenditure of £1.1 million (2020/21: The Board’s policy is to always maintain a strong capital base, with an appropriate debt to equity mix, to ensure investor, creditor and market £4.9 million) for property, plant and equipment and £5.5 million (2020/21: £nil) for intang ble assets. confidence and to support the future development of the business. The Board monitors the return on capital employed (ROCE), which the Group defines as adjusted operating profit as a percentage of monthly average net assets excluding net debt and retirement benefit obligations, and the 27 Related parties level of dividends to ordinary shareholders. The Group’s joint venture (Note 17) is a related party and during the year, the Group made sales of £3.3 million (2020/21: £1.9 million) to the joint The Group seeks to raise debt from a variety of sources and with a variety of maturities. As at 31 March 2022, the Group had a £300 million venture, and a balance of £2.1 million (2020/21: £1.8 million) was outstanding at the year end. sustainability-linked loan, with an accordion of up to a further £100 million, which has a maturity of November 2024 with an option for the Group The Group’s pension schemes are related parties and the Group’s transactions with them are disclosed in Note 10. to extend for up to one further one-year term subject to individual lender approval; and private placement loan notes of €18 million with a maturity of October 2026, US$80 million with a maturity of December 2026, €13 million with a maturity of October 2029, US$35 million with a maturity of The key management personnel of the Group are the Directors and the Senior Management Team, whose compensation was: March 2030 and US$50 million with a maturity of October 2031. 2022 2021 £m £m 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. At the Short-term employee benefits 12.0 9.0 year end the Group comfortably met these covenants with net debt to adjusted EBITDA of 0.1x (2020/21: 0.5x) and EBITA to interest of 44.6x (2020/21: 26.7x). Post-employment benefits 0.2 0.2 Termination benefits 0.2 0.2 There were no significant changes in the Group’s approach to capital management during the year. Share-based payments 5.9 4.0 24 Provisions and contingent liabilities 18.3 13.4 Provisions are recognised when the Group has a present obligation as a result of a past event and a reasonable estimate can be made of Transactions and balances between the Company and its subsidiaries have been eliminated on consolidation. a probable adverse outcome. Otherwise, material contingent liabilities are disclosed unless the transfer of economic benefits is remote. Penalties and 28 Prior year acquisitions interest on As accrued for at 31 March 2021, an additional £0.3 million of consideration was paid for John Liscombe Limited and £2.5 million refunded for | | | | | | uncertain | | Onerous | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | Reorganisation | | | income tax | | contract | | Dilapidation | | | Synovos, Inc. (Synovos). | | | | | provision | | provision | | provision | | provision | | Total | | | | | | | £m | | £m | | £m | | £m | £m | Two measurement period adjustments were made to the fair values of Synovos’s net assets acquired on 12 January 2021. The first adjustment | | | 1 | | | | | | | | | | | related to the measurement of uncertain tax provisions for transfer pricing and resulted in the recognition of an additional current income tax liability | | t 1 April 2021 (restated | ) 4.8 1.4 0.3 0.4 6.9 | | | | | | | | | | | | of £0.8 million, penalties and interest on uncertain income tax provision of £0.4 million and an indemnification asset of £1.2 million. The second dditions 1.6 0 2 – – 1.8 adjustment arose as a result of new information received which changed the assumptions used to fair value the customer contracts and Utilised (3.0) – (0.3) – (3 3) relationships intangible assets. This resulted in the customer contracts and relationships intangible assets decreasing by £10.1 million, goodwill At 31 March 2022 3.4 1.6 – 0.4 5.4 increasing by £7.6 million and deferred tax liabilities decreasing by £2.5 million. The balance sheet as at 31 March 2021 has been restated accordingly and there was no change to the income statement for the year ended 31 March 2021. Analysed in the balance sheet as: | 2022 | | 2021 | | | --- | --- | --- | --- | | | restated | | 1 | | £m | | £m | | Current 2.6 4.9 Non-current 2.8 2.0 5.4 6.9 1. Restated for measurement period adjustments for prior year acquisitions (Note 28). The reorganisation provision is expected to be fully spent by March 2027 and the dilapidation provision is expected to be fully utilised by March 2028. At 31 March 2022, there were no material contingent liabilities (2020/21: none). 174 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 175 A A A A Financial statements ### Group accounts continued ## Notes to the Group accounts ## continued | 29 Related undertakings | 29 Related undertakings continued | | | | --- | --- | --- | --- | | A full list of related undertakings (comprising subsidiaries and a joint venture) is set out below. All subsidiaries are wholly owned and operate within | | Country of | Class of | | | Name and registered address of undertaking | incorporation | share held | their countries of incorporation. Those companies marked with an asterisk (*) are indirectly held by the Company. RS Components AS* Norway Ordinary | | Country of | Class of | | | --- | --- | --- | --- | | Name and registered address of undertaking | incorporation | share held | 10. etg., Fredrik Selmers vei 6, Oslo, 0663, Norway | | Provider of product and service solutions for designers, builders and maintainers of industrial equipment and operations | | | RS Components Corporation* Philippines Common and | preference | RS Components Pty Limited* | ustralia Ordinary | 21st Floor Multina ional Bancorporation Centre, 6805 Ayala Avenue, Maka i City, Philippines | | | --- | --- | --- | --- | | 25, Pavesi Street, Smithfield, Sydney NSW 2164, Australia | | RS Components sp. z.o.o.* Poland Ordinary | | | RS Components Handelsgesellschaft m.b.H* | ustria Share of equity | Ul. Domaniewska 48, 02-672, Warszawa, Poland | | | lbrechtser Straße 11, 3950, Gmünd, Austria | | IESA Poland sp. z.o.o. Poland Ordinary | | | IESA Belgium B.V.* Belgium Ordinary | | Ul. Postępu 21 Warszawa, mazowieckie, 02-676 Poland | | | Louizalaan 65/11, 1050 Elsene | | IESA Ireland Limited* Republic | Ordinary | of Ireland Allied Electronics (Canada), Inc.* Canada Common 13-18 City Quay, Dublin 2, Ireland 199 Bay Street, Suite 5300, Toronto ON M5L 1B9, Canada Radionics Limited* Republic Ordinary of Ireland Synovos Canada Corp.* Canada Common Glenview Industrial Estate, Herberton Road, Rialto, Dublin 12, Ireland 600-1741 Lower Waters Street, Halifax NS NS B3J 0J2, Canada Synovos Ireland Limited* Republic Ordinary of Ireland RS Componentes Electronicos Limitada* Chile Ordinary 70 Sir John Rogerson’s Quay, Dublin 2, Ireland v. Eduardo Frei Montalva, 6001-71 Conchali, Santiago, Chile IESA S.E. Asia Pte. Ltd.* Singapore Ordinary RS Components Limited* China Ordinary 10 Ubi Crescent, #06-18 Ubi Techpark, 408564, Singapore Suite 1601, Level 16, Tower 1, Kowloon Commerce Centre, 51 Kwai Cheong Road, Kwai Chung, Hong Kong RS Components Pte Ltd* Singapore Ordinary RS Components (Shanghai) Company Limited* China Common and 112 Robinson Road, #05-01, 068902, Singapore preference Synovos Singapore Pte. Ltd.* Singapore Ordinary Unit 501, Floor 5, Building C, The New Bund World Trade Center Phase II, No.3, Lane 227, Dong Yu Road, Pudong Shanghai, China RS Components A/S* Denmark Ordinary 1 Marina Boulevard, #28-00, One Marina Boulevard, 018989, Singapore Nattergalevej 6, 2400, København NV, Denmark IESA s.r.o.* Slovakia Ordinary IESA SAS* France Ordinary Lazaretská 8, Bratislava- mestská časť Staré Mesto, 811 08, Slovakia Rue Norman King, 60000, Beauvais, France Amidata S.A.U.* Spain Ordinary RS Components SAS* France Ordinary venida de Bruselas 6, Alcobendas, 28108, Madrid, Spain Rue Norman King, 60000, Beauvais, France IESA AB* Sweden Ordinary Integrated Engineering Stores Associates Deutschland GmbH* Germany Ordinary Drottninggatan 96, 113 60, Stockholm, Sweden Bleibtreustr. 21, 10623, Berlin, Germany RS Components AB* Sweden Ordinary RS Components GmbH* Germany Ordinary Fabriksgatan 7, 3v, 412 50 Gotborg, Sweden Mainzer Landstraße 180, 60327, Frankfurt, Germany RS Components Co., Ltd* Thailand Ordinary IESA Hungary Korlátolt Felelősségű Társaság* Hungary Ordinary GMM Grammy Place, Room No. 1901-1904, Floor 19, No. 50, Sukhumvit 21 (Asoke), Klongtoey Nua, Wattana, Bangkok, 10110, Thailand 1062, 1-3. Tower A, 6 h floor, Budapest IESA A & D Limited* UK Ordinary † IESA Works Daten Park, Birchwood, Warrington, Cheshire, WA3 6UT, UK RS Components & Controls (India) Limited* India Ordinary 222 Okhla Industrial Estate, New Delhi, India IESA Limited* UK Ordinary RS Components S.r.l.* Italy Ordinary IESA Works Daten Park, Birchwood, Warrington, Cheshire, WA3 6UT, UK Sesto san Giovanni, Viale Thomas Alva Edison, 110, 20099, MI, Italy John Liscombe Limited* UK Ordinary and preference IESA Italy S.r.l* Italy Ordinary Fifth Floor, Two Pancras Square, London N1C 4AG, UK Sesto san Giovanni, Viale Thomas Alva Edison, 110, 20099, MI, Italy Needlers Limited* UK Ordinary and preference RS Components KK* Japan Ordinary Fifth Floor, Two Pancras Square, London N1C 4AG, UK West Tower 12F, Yokohama Business Park, 134 Godocho, Hodogaya, Yokohama, Kanagawa, 240-0005, Japan OKdo Technology Limited* UK Ordinary RS Components Sdn Bhd* Malaysia Ordinary Fifth Floor, Two Pancras Square, London N1C 4AG, UK Suite 9D, Level 9, Menara Ansar, 65 Jalan Trus, Johor Bahru, 80000, Johor, Malaysia RS Components Limited UK Ordinary Allied Electronics & Automation S. de R.L. de C.V.* Mexico Ordinary Birchington Road, Weldon, Corby, Northamptonshire, NN17 9RS, UK venida Circunvalación Agustin Yalez N° 2613 Int. 1A 105, Colonia Arcos Vallarta Sur, Guadalajara Jalisco, 44500 Mexico Allied Electronics, Inc* United States Common of America Storeroom Solutions Mexico, S. de R.L. de C.V.* Mexico Ordinary 7151 Jack Newell Blvd S., Fort Worth, TX 76118, United States Florencia 57 P, 3 Juarez Distritio Federal, 06600, Mexico New DEAM, LLC* United States Common of America IESA Netherlands B.V.* Netherlands Ordinary Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, United States Bingerweg 19, 2031 AZ Haarlem, Netherlands MRO Distribution, Inc.* United States Common of America Liscombe B.V.* Netherlands Ordinary Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, United States Jarmuiden 56 a, 1046 AE, Amsterdam, Netherlands Synovos, Inc.* United States Common of America RS Components B.V.* Netherlands Ordinary Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, United States Bingerweg 19, 2031 AZ Haarlem, Netherlands Synovos Puerto Rico, LLC* United States Common of America RS Components Limited* New Zealand Ordinary Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, United States KPMG, 18 Viaduct Harbour Avenue, Auckland, 1010, New Zealand 176 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 177 A A A A A A Group accounts continued # Notes to the Group accounts continued ## 29 Related undertakings continued | Name and registered address of undertaking | Country of incorporation | Class of share held | | --- | --- | --- | | **Holding, Financing and Management Companies** | | | | Electrocomponents Limited | China | Ordinary | | Suite 1601, Level 16, Tower 1, Kowloon Commerce Centre, 51 Kwai Cheong Road, Kwai Chung, Hong Kong | China | Ordinary | | RS Components Business Services (Foshan) Limited* | China | Ordinary | | Zhid Floor, Glory International Financial Center, No.25, Ronghe Road, Guicheng, Nanhai District, Foshan, Guangdong, 528200, China | France | Ordinary | | Electrocomponents France SARL* | Germany | Ordinary | | Rue Norman King, 60000, Beauvais, France | Germany | Ordinary | | Bodenfeld Immobilien GmbH* | Germany | Ordinary | | Manzar Landstraße 180, 60327, Frankfurt, Germany | Germany | Ordinary | | Electrocomponents Jersey Finance Unlimited* | Jersey | Common | | 44 Esplanade, St Helier, JE4 9MG Jersey | Netherlands | Partnership | | Synovos Netherlands C.V.* | Netherlands | Partnership | | Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, United States | Thailand | Ordinary | | Electrocomponents Newco (Thailand) Limited* | Thailand | Ordinary | | GMM Grammy Place, Room No. 1901-1904, Floor 19, No. 50, Sukhumvit 21 (Asoke), Klongtoey Nua, Wattana, Bangkok, 10110, Thailand | Thailand | Ordinary | | Electrocomponents Holdings (Thailand) Limited* | Thailand | Ordinary | | GMM Grammy Place, Room No. 1901-1904, Floor 19, No. 50, Sukhumvit 21 (Asoke), Klongtoey Nua, Wattana, Bangkok, 10110, Thailand | Thailand | Ordinary | | Electrocomponents (Thailand) Limited* | Thailand | Ordinary | | GMM Grammy Place, Room No. 1901-1904, Floor 19, No. 50, Sukhumvit 21 (Asoke), Klongtoey Nua, Wattana, Bangkok, 10110, Thailand | UK | Ordinary | | Electrocomponents Finance Limited | UK | Ordinary | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary | | Electrocomponents Overseas Limited | UK | Ordinary | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary | | Electrocomponents Pension Trustees Limited | UK | Ordinary | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary | | Electrocomponents U.K. Limited | UK | Ordinary | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary | | Electrocomponents US Finance Limited* | UK | Ordinary | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary | | IESA A & D Holdings Limited* | UK | Ordinary | | IESA Works Daten Park, Birchwood, Warrington, Cheshire, WA3 6UT, UK | UK | Ordinary | | IESA Holdings Limited* | UK | Ordinary and preference | | IESA Works Daten Park, Birchwood, Warrington, Cheshire, WA3 6UT, UK | UK | Ordinary and preference | | Needlers Holdings Limited* | UK | Ordinary and preference | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary and preference | | RS Components Holdings Limited* | UK | Ordinary and preference | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | UK | Ordinary and preference | | Electrocomponents North America LLC* | United States of America | Common | | 7151 Jack Newell Blvd S., Fort Worth, TX 76118, United States | United States of America | Common | | Electrocomponents (US), Inc.* | United States of America | Common | | 7151 Jack Newell Blvd S., Fort Worth, TX 76118, United States | United States of America | Common and preference | | Electrocomponents, Inc.* | United States of America | Common and preference | | 7151 Jack Newell Blvd S., Fort Worth, TX 76118, United States | United States of America | Common and preference | | Electrocomponents North America, Inc.* | United States of America | Common and preference | | 7151 Jack Newell Blvd S., Fort Worth, TX 76118, United States | United States of America | Common and preference | | Electrocomponents US LLC* | United States of America | Common and preference | | 7151 Jack Newell Blvd S., Fort Worth, TX 76118, United States | United States of America | Common and preference | | Synovos International, Inc.* | United States of America | Common and preference | | Two Radnor Corporate Center, Suite 400, Radnor, PA 19087, United States | United States of America | Common and preference | ## 29 Related undertakings continued | Name and registered address of undertaking | | --- | | **Not currently trading** | | RS Components (Proprietary) Limited* | | 20 Indianapolis Street, Kyalami Business Park, B & W (Hygiene Services) Company Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Electro Lighting Group Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Electro-Leasing Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Electromail Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Monition Limited* | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Radiospares Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Reading Windings Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | RS Components International Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | Electrocomponents Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | RS Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | RS Supplies Limited | | Fifth Floor, Two Pancras Square, London N1C 4AG, UK | | † Note 17 provides details about the Company's inter | | RS Components Limited (UK), Electroco | | (Germany) export to most countries where | | Switzerland, the Philippines and China (T | 178 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 Financial statements ### Company accounts | Company balance sheet | | | | Company statement of changes in equity | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | As at 31 March 2022 | | | | For the year ended 31 March 2022 | | | | | | | | | | | 2022 | 2021 | | | Share | | | | Profit | | | | Notes | £m | £m | | Share | premium | Own shares | | and loss | | | | | | | | | capital | account | held by EBT | | account | | Total | | Fixed assets | | | | | £m | £m | | £m | | £m | £m | | Tangible assets 7 16.4 17.0 | | | | At 1 April 2020 44.6 51.4 (0.7) 602 5 697.8 | | | | | | | | | Investments in subsidiaries 8 | | 343.0 330.0 | | | | | | | | | | Profit and total comprehensive income for the year – – – 102 3 102.3 | Total fixed assets | 359.4 347.0 | | Dividends (Note 17) – – – (71.2) (71.2) | | | | --- | --- | --- | --- | --- | --- | | Current assets | | | Equity-set led share-based payments (Note 5) – – – 7 0 7.0 | | | | Debtors: amounts falling due after more han one year 10 1.8 2.2 | | | Share placing, net of transaction costs (Note 17) 2.2 173 9 – – 176.1 | | | | Debtors: amounts falling due within one year 10 | 837.2 917.2 | | Set lement of share awards (Note 17) 0.2 3 2 0.8 (0.8) 3.4 | | | | Cash at bank and in hand | 170.8 104.6 | | Purchase of own shares by EBT (Note 17) – – (1.6) – (1.6) | | | | Total current assets | 1,009.8 1,024.0 | | Tax on equity-settled share-based payments – – – 0.4 0.4 | | | | Creditors: amounts falling due wi hin one year 11 (308.6) (308.1) | | | At 31 March 2021 47.0 228 5 (1.5) 640 2 914.2 | | | | Net current assets | 701.2 715.9 | | Profit and total comprehensive income for the year – – – 59 2 59.2 | | | | Total assets less current liabilities 1,060.6 1,062.9 | | | Dividends (Note 17) – – – (76.2) (76.2) | | | | Creditors: amounts falling due after more than one year 12 (153.0) (148.6) | | | Equity-set led share-based payments (Note 5) | | – – – 9 9 9.9 | | Provisions for liabilities and charges 13 | | – (0.1) | Set lement of share awards (Note 17) | 0.1 2 9 1.4 (1.4) 3.0 | | | Net assets | 907.6 914.2 | | Purchase of own shares by EBT (Note 17) | | – – (2.9) – (2.9) | | Capital and reserves | | | Tax on equity-settled share-based payments | | – – – 0.4 0.4 | | Share capital 17 47.1 47.0 | | | At 31 March 2022 | 47.1 231.4 (3.0) 632.1 907.6 | | | Share premium account 17 | 231.4 228.5 | | | | | | Own shares held by Employee Benefit Trust (EBT) 17 | | (3.0) (1.5) | | | | | Profit and loss account (including profit for he year of £59.2 million (2020/21: £102.3 million)) 17 | 632.1 640.2 | | | | | | Total equity | 907.6 914.2 | | | | | The Company accounts on pages 180 to 185 were approved by the Board of Directors on 24 May 2022 and were signed on its behalf by: David Egan Chief Financial Officer RS Group plc (formerly Electrocomponents plc) Company number: 647788 180 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 181 Company accounts continued # Notes to the Company accounts For the year ended 31 March 2022 1 General information RS Group plc (formerly Electrocomponents plc) (the Company) is the parent company of the RS Group and is included in the consolidated accounts of RS Group plc (the Group accounts). The Company is a public limited company and is incorporated, registered and domiciled in England and Wales. The address of its registered office is Fifth Floor, Two Pancras Square, London N1C 4AG, UK. 2 Statement of compliance The individual accounts of the Company have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102 'The Financial Reporting Standard applicable in the UK and Republic of Ireland' (FRS 102), and the Companies Act 2006. 3 Basis of preparation These are the Company's separate accounts and have been prepared on a going concern basis, under the historical cost convention, as modified by the recognition of certain financial assets and liabilities measured at fair value through profit and loss. They are presented in sterling and rounded to the nearest £5.1 million. The principal accounting policies have been applied consistently unless otherwise stated. The preparation of accounts under FRS 102 requires the Company to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. There are no areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant that are included in these accounts. Under section 408 of the Companies Act 2006 the Company is exempt from the requirement to present its own profit and loss account. The Company has taken advantage of the following disclosure exemptions available under FRS 102: - i. preparation of a cash flow statement - ii. financial instrument disclosures - iii. share-based payment disclosures - iv. key management personnel compensation disclosure Transactions in foreign currencies are recorded using the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated at the rate ruling at that date and the gains and losses on translation are recognised in profit or loss. 4 Employees | Average number of employees | 2022 | 2021 | | --- | --- | --- | | Management and administration | 57 | 51 | | Aggregate employment costs | 2022 £m | 2021 £m | | --- | --- | --- | | Wages and salaries | 8.2 | 6.6 | | Social security costs | 0.9 | 1.0 | | Share-based payments – equity-settled (Note 5) | 2.8 | 2.3 | | Share-based payments – cash-settled | 0.7 | 0.4 | | Defined contribution retirement benefit costs (Note 6) | 0.3 | 0.3 | | **Total** | **12.9** | **10.6** | Information on the Directors' remuneration is given in the Directors' Remuneration Report on pages 108 to 129. The numbers and costs above are for employees who work for the Company. There are a number of Group employees whose contracts of employment are with the Company but who actually work in its subsidiaries and perform no services directly for the Company. These employees are not included above. 5 Share-based payments The Company operates a number of share-based payment schemes for employees of the Group, details of which are in Note 9 of the Group accounts. Certain of the Company's employees participate in the DSBP, equity-settled LTIP and equity-settled SAYE which grant rights to the Company's own equity instruments and hence are accounted for as equity-settled share-based payments. 6 Post-employment benefits Employees of the Company may be mer Defined benefit scheme There is no agreement or stated policy for and RS Components Limited, the main U members work for RS Components Limit recognises a cost equal to its contribution The UK defined benefit scheme is descri Defined contribution scheme Contributions to the defined contribution s 7 Tangible assets Tangible assets are stated at cost (or de accumulated depreciation and any provi asset to its working condition for its inten No depreciation has been charged on lar investment property (freehold warehouse 10%; and computer equipment 20%. Cost At 1 April 2021 and 31 March 2022 Depreciation At 1 April 2021 Charged in the year At 31 March 2022 Net book value At 31 March 2022 At 31 March 2021 8 Investments in subsidiaries Investments in subsidiaries including long recognised in the profit and loss account. The expense relating to share-based pay treated as an increase in investments with £7.2 million (2020/21: £4.7 million). Cost At 1 April 2021 Additions Transfer on differences At 31 March 2022 Impairments At 1 April 2021 and 31 March 2022 Net book value At 31 March 2022 At 31 March 2021 A list of the Company's related undertakr 182 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the ye Financial statements ### Company accounts continued ## Notes to the Company accounts ## continued 12 Creditors: amounts falling due after more than one year 9 Financial instruments 2022 2021 Basic financial instruments £m £m Basic financial assets, including trade and other debtors and cash and bank balances, are initially recognised at transaction price and then Unsecured private placement loan notes repayable after more than five years 75.5 147.3 subsequently at amortised cost less any provision for impairment. Unsecured private placement loan notes repayable from four to five years 76.2 – Basic financial liabilities, including trade and other creditors, bank loans and loans from subsidiaries, are initially recognised at transaction price and Other creditors 0.9 1.0 then subsequently at amortised cost. Cash-settled share-based payment liability 0.4 0.3 153.0 148.6 Derivative financial instruments and hedging activities The Company has elected to adopt the recognition and measurement provisions of IAS 39 (as adopted in the UK) and the disclosure provisions of Details of the US dollar private placement loan notes are provided in Notes 21 to 23 of the Group accounts. FRS 102 in respect of financial instruments. 13 Provisions for liabilities and charges The Company uses derivative financial instruments to hedge its exposure to interest rate and foreign exchange risks arising from operational and Provisions for liabilities and charges are recognised when the Company has a present obligation as a result of a past event and a reasonable financing activities. It principally employs forward foreign exchange contracts to hedge against changes in exchange rates on behalf of its operating estimate can be made of a probable adverse outcome. subsidiaries and these subsidiaries apply cash flow hedging. In addition, there are some interest rate swaps which swap US dollar fixed rate private placement loan notes into floating US dollars. In accordance with its treasury policies, the Company does not hold or issue derivative Onerous financial instruments for trading purposes. contract provision £m All the Company’s derivatives are measured at fair value with changes in the fair values recognised in profit or loss. t 1 April 2021 0.1 In line with the Company’s risk management policies, the interest rate swaps are designated as fair value hedges. The fair value of the swaps is Utilised (0.1) the market value of the swaps at the balance sheet date, taking into account current interest rates. Changes in the fair values of the swaps and changes in fair value of the related hedged items are recognised directly in profit or loss. At 31 March 2022 – Interest rate benchmark reform 14 Deferred tax The Company has completed its transition to alternative benchmark rates arising as a result of the global financial regulators’ interest rate The charge or credit for taxation is based on the taxable profit or loss for the year and takes into account taxation deferred because of timing benchmark reform and so, as at 31 March 2022, has no remaining risks due to this transition. This transition has resulted in no changes to the differences. Deferred tax is recognised, without discounting, in respect of all timing differences between the treatment of certain items for taxation Company’s risk management strategy. and accounting purposes. Deferred tax assets are attributable to the following: 10 Debtors | | 2022 | 2021 | | 2022 | 2021 | | --- | --- | --- | --- | --- | --- | | | £m | £m | | £m | £m | | Amounts falling due within one year: | | | Equity-set led share-based payments 1.7 1.0 | | | | mounts owed by subsidiary undertakings 829.7 910.4 | | | Other 0.1 0.1 | | | | Interest rate swaps (Note 9) | 0.1 – | | Deferred tax asset (Note 10) | 1.8 1.1 | | | Other deriva ive assets | 4.7 4.0 | | | | | There are no unused tax losses or unused tax credits. | Prepayments | 2.7 2.8 | | | | | --- | --- | --- | --- | --- | | Debtors: amounts falling due within one year | 837.2 917.2 | 15 Operating lease commitments | | | | Amounts falling due after more than one year: | | Future minimum amounts payable under non-cancellable operating leases are: | | | | Interest rate swaps (Note 9) – 1.1 | | | 2022 | 2021 | | | | | £m | £m | | Deferred tax asset (Note 14) | 1.8 1.1 | | | | Within one year 1.2 1.2 Debtors: amounts falling due after more than one year 1.8 2.2 From one to five years 4.9 4.9 Amounts owed by subsidiary undertakings are unsecured, bear interest at market rates and are repayable on demand or at specified dates within fter five years 0.3 1.5 the next 12 months. 6.4 7.6 11 Creditors: amounts falling due within one year 16 Contingent liabilities 2022 2021 £m £m The Company enters into financial guarantee contracts to guarantee the indebtedness of certain other companies within the Group. The Company mounts owed to subsidiary undertakings 209.0 192.3 considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contracts as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee. Bank overdrafts 85.9 105.8 Interest rate swaps (Note 9) 0.2 – Guarantees exist in respect of bank facilities available to certain subsidiaries, up to a maximum of £77.5 million (2020/21: £71.3 million), of which £9.5 million (2020/21: £2.1 million) had been drawn down at the end of the year. Other deriva ive liabili ies 4.7 4.0 ccruals 8.2 5.4 17 Capital and reserves and dividends Other creditors 0.2 0.2 Details of the Company’s share capital, share premium account, EBT and dividends paid to shareholders are in Notes 13 and 25 of the Group Cash-settled share-based payment liability 0.4 0.4 accounts. 308.6 308.1 The Company has sufficient distr butable reserves to pay dividends for a number of years and is also able to increase its distr butable reserves Amounts owed to subsidiary undertakings are unsecured, bear interest at market rates and are repayable on demand or at specified dates within further by receiving distr butions from its subsidiaries. the next 12 months. 184 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 185 A A A A A Shareholder information ### Five year record Shareholder information ## Five year record ## Registered office, ## Year ended 31 March 2022 2021 2020 2019 2018 ## 3 financial calendar restated £m £m £m £m £m Revenue 2,553.7 2,002.7 1,953.8 1,884.4 1,705.3 Operating profit 308.8 167 2 205.3 201.0 172.6 ## and advisors dd back: amortisation of acquired intangibles 11.6 7 0 5.4 4.4 – dd back: acquisition-related items – 2 9 – – – dd back: substantial reorganisa ion costs, substantial asset write-downs and | one-off pension cost | | – 11 2 10.0 14.9 4.5 | | | | --- | --- | --- | --- | --- | | Adjusted operating profit | 320.4 188 3 220.7 220.3 177.1 | | | | | Net finance costs (7.1) (6.8) (5.9) (6.1) (4.0) | | | Registered office | Be scam smart | | | | | RS Group plc | Investment scams are designed to look like genuine investments. | | Share of profit of joint venture | | 0.5 0 2 0.2 0.3 – | | | Fifth Floor Adjusted profit before tax 313.8 181.7 215.0 214.5 173.1 Spot the warning signs Two Pancras Square mortisa ion of acquired intangibles (11.6) (7.0) (5.4) (4.4) – Have you been: London N1C 4AG • contacted out of the blue? cquisi ion-related items – (2.9) – – – United Kingdom • promised tempting returns and told the investment is safe? Substantial reorganisation costs, substantial asset write-downs and one-off pension cost – (11.2) (10.0) (14 9) (4.5) Tel: +44 (0)20 7239 8400 • called repeatedly? rsgroup.com Profit before tax 302.2 160.6 199.6 195.2 168.6 • told the offer is only available for a limited time? Registered number: 647788 Income tax expense (72.2) (35.1) (44.9) (47.1) (19.0) | | | Registered in England and Wales | If so, you might have been contacted by fraudsters. | | --- | --- | --- | --- | | Profit for he year attributable to owners of he Company | 230.0 125 5 154.7 148.1 149.6 | | | | | | Shareholder services | Avoid investment fraud | | | | Registrar | Reject cold calls | Earnings per share 48.9p 27.7p 34.7p 33.4p 33 9p | | | | If you have any questions about your shareholding | If you have received unsolicited contact about an investment | | --- | --- | --- | --- | --- | | | | | in the Company, please contact our Registrar: | opportunity, the chances are it is a high risk investment | | Adjusted earnings per share | | 51.3p 31.3p 37.7p 37.0p 28.4p | Computershare Investor Services PLC | or a scam. You should treat the call with extreme caution. | | | | | The Pavilions, Bridgwater Road, Bristol BS99 6ZZ | The safest thing to do is to hang up. | | | 1 | | Tel: 0370 703 0199 | | | Dividend per share | 18.0p 15.9p 15.4p 14.8p 13.25p | | | | Check the FCA Warning List www.investorcentre.co.uk/contactus The FCA Warning List is a list of firms and individuals we know Non-current assets 706.1 711 0 573.4 463.4 357.6 Investor Centre are operating without our authorisation. To access online information about your shareholding Current assets 1,395.1 1,134 8 1,044.3 935.9 749.8 Get impartial advice visit www.investorcentre.co.uk. Through the Investor Current liabilities (726.2) (631.8) (570.4) (487 5) (391.0) Think about getting impartial financial advice before you hand Centre you can: Non-current liabilities (266.5) (314.6) (327.4) (322 5) (233.9) over any money. Seek advice from someone unconnected to • Update member details and address changes the firm that has approached you. Net assets 1,108.5 899.4 719.9 589.3 482.5 • Update dividend bank mandate instructions and review dd back: net deb 42.1 122 0 189.8 122.4 65.0 dividend payment history Report a scam • Register to receive Company communications electronically dd back: retirement benefit net assets / obligations 12.4 55.7 55.8 83.6 72.4 If you suspect that you have been approached by Your shareholder reference number (SRN) is required to fraudsters please tell the FCA using the reporting form at Capital employed 1,163.0 1,077.1 965.5 795.3 619.9 access your shareholding. This can be can be found at the www.fca.org.uk/consumers/report-scam-us. You can also top of your welcome letter or share certificate. Alternatively, call the FCA Consumer Helpline on 0800 111 6768. 2 Return on capital employed (ROCE) 28.7% 19.4% 24.0% 29.5% 28.7% you can obtain your SRN by contacting Computershare on If you have lost money to investment fraud, you should the number given above. report it to Action Fraud on 0300 123 2040 or online at Free cash flow 160.5 132 9 72.4 76.5 102.7 www.actionfraud.police.uk Dividend reinvestment plan (DRIP) Should you wish to reinvest your dividends in the Company, Find out more at www.fca.org.uk/scamsmart Adjusted free cash flow 162.9 145.4 80.9 84.5 105.1 you can take advantage of our DRIP. It will allow you to use Remember: if it sounds too good to be true, it probably is! your cash dividend to buy more RS Group shares in Average number of employees 7,383 6,806 7,044 6,603 5,868 the market. You will need to complete a DRIP application form and return it to Computershare. This can be found, together with plan terms and conditions, at www.investorcentre.co.uk Share price at 31 March 1,084.0p 993.0p 516 2p 561.8p 600 2p or in the Shareholder Information section of our website under 1. An additional interim dividend for the year ended 31 March 2020 of 9.5p, to replace the deferred final dividend, was paid on 18 December 2020. This is included in the 2019/20 dividend per FAQs. Alternatively, please contact Computershare on the share amount. number given above, and details and a form will be sent to you. 2. ROCE for the years ended 31 March 2020 and before were updated in 2020/21 to be based on monthly average capital employed. 3. Restated for measurement period adjustments for prior year acquisitions (Note 28). Share price information The latest information on RS Group plc share price is available on our corporate website: rsgroup.com 186 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 187 A A A A A A A t 186 RS Group plc Annua eport and ccoun s f r the ar end d Marc 2022 Shareholder information ### Shareholder information continued ## Locations Financial calendar ## Get more online Announcement of results The results of the Group are normally published at the Latest shareholder information Archive information following times: • Share price • Financial results • Half-year results for the six months ending 30 September • Corporate governance • Annual Reports in early to mid-November • Analyst consensus estimates • Company news • Preliminary announcement for the year ending 31 March • Updates via email • Video l brary in late May • Annual Report and Accounts for the year ending 31 March in mid-June For more information and the latest news visit: rsgroup.com Dividend payments Our current policy is to normally make dividend payments at the following times: • Interim dividend in January • Final dividend in July Contacts ## Principal locations Auditors PricewaterhouseCoopers LLP EMEA Netherlands Americas Asia Pacific 1 Embankment Place Austria nl.rs-online.com Canada Australia London WC2N 6RH at.rs-online.com ca-en.alliedelec.com au.rs-online.com Norway Financial public relation advisors Belgium no.rs-online.com Chile China Tulchan Communications Group benl.rs-online.com en-cl.alliedelec.com rsonline.cn 85 Fleet Street Poland twen.rs-online.com | London EC4Y 1AE | | pl.rs-online.com | | | | --- | --- | --- | --- | --- | | | Czech Republic | | Mexico | | | | cz.rs-online.com | | mx-en.alliedelec.com | India | | Financial advisors | | Portugal | | | in.rsdelivers.com Citigroup pt.rs-online.com Denmark US Citigroup Centre dk.rs-online.com alliedelec.com Japan South Africa 33 Canada Square synovos.com jp.rs-online.com France za.rs-online.com London E14 5LB fr.rs-online.com Malaysia Rothschild & Co Spain my.rs-online.com New Court Germany es.rs-online.com St Swithin’s Lane de.rs-online.com New Zealand Sweden | London EC4N 8AL | | | nz.rs-online.com | | --- | --- | --- | --- | | | Hungary | se.rs-online.com | | | Registrar and transfer office | hu.rs-online.com | | Philippines | Switzerland Computershare Investor Services PLC ph.rs-online.com Ireland ch.rs-online.com The Pavilions ie.rs-online.com Singapore Bridgwater Road United Kingdom sg.rs-online.com | Bristol | Italy | uk.rs-online.com | | | --- | --- | --- | --- | | BS99 6ZZ | it.rs-online.com | iesa.co.uk | South Korea | | | | needlers.co.uk | kr.rs-online.com | Solicitors Allen & Overy LLP Thailand One Bishops Square th.rs-online.com London E1 6AD Stockbrokers UBS 5 Broadgate London EC2M 2QS Numis Securities Limited The London Stock Exchange 10 Paternoster Square London EC4M 7LT 188 RS Group plc Annual Report and Accounts for the year ended 31 March 2022 Annual Report and Accounts for the year ended 31 March 2022 RS Group plc 189 ## Gr oup ### RS Group plc ### (formerly Electrocomponents plc) ### Fifth Floor ### Two Pancras Square ### London N1C 4AG ### United Kingdom ### Tel: +44 (0)20 7239 8400 ### rsgroup.com ® Printed by Park Communications on FSC certified paper. 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