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RS Group Strategy Overview June 2022

In May 2022, RS Group plc re-branded from Electrocomponents plc, marking the Company’s intention to accelerate its performance from a good business into a great one. RS is the Group’s primary customer brand, recognised by designers, builders and maintainers of industrial equipment and operations around the world. As RS Group, the business will come together under one brand united behind a common ambition and corporate purpose.

RS Group Strategy Overview June 2022


Building on its core competitive strengths and strong performance, RS Group has intensified its strategy with a differentiated business model that aims to deliver best-in-class growth and value over the medium and long term. We want to become first choice for all our stakeholders, and we will do this by:

  • Galvanising a high-performance purpose-led culture
  • Realising a world-class customer experience
  • Extending wisdom, insight and data, and capitalising on the amount of data that we have
  • Accelerating to a solutions-led innovative business
  • Transforming our executional capabilities

All of these are all powered by systems, processes, technology, and people. The planning, execution and delivery of these goals will be done through a scorecard that sets out the Company’s action plan in three key areas:

  • Cultural transformation
  • Operational efficiency
  • Our growth accelerators

Cultural transformation
We are developing a purpose-led culture, our most important asset that differentiates us from the competition. We have invested and continue to invest in our people and are rewarding high performance. We have simplified our management structure and we will continue to simplify our structure. We have a retention rate of 90%, and we have seen our employee engagement scores continue to increase. We believe that our purpose-driven culture is key in driving a strong ESG approach embedded into all that we do. Our 2030 ESG action plan, For a Better World, launched in November 2021, is fundamental to our purpose.

We also see the opportunity from supporting all our stakeholders as they become more sustainable. For example:

  • Providing design tools for innovative engineers
  • Monitoring energy usage and offering products and services solutions to reduce carbon emissions
  • Developing predictive maintenance solutions
  • Reengineering supply chains to reduce Scope 1, 2 and 3 emissions
  • Consolidating supply chains and deliveries through our integrated supply solution

Operational efficiency
We are continuing to invest and drive a world-class execution and scalability evidenced through the work that we have done in Asia Pacific, turning the business around; across the Group, utilising our insight and data through Group shared business services; and investing in our distribution centres to improve automation, efficiency, and sustainability.

Our experience and expertise have allowed us to identify supply chain issues in the market early, hence, the investments we made in inventory during the year. Working closely with our suppliers to secure and invest appropriately in greater levels of inventory provided strength in availability and drove performance of the top line. We are delivering industry-leading availability despite the significant and serious supply chain constraints across the world.

Growth accelerators
Our three growth accelerators are Product Choice; Solutions; and Being easy to do business with through an omni-channel approach:

Our differentiated product offer
We are a leading specialist distributor for industrial customers. Our data and insight shape our product offer. We have a wide range, including many products with a low inventory turn that are critical in keeping businesses running. Our own brand, RS PRO, offers a value alternative. Many of our products deliver improved efficiency and lower carbon emissions. We are driving growth in total product numbers and new product development.

Solutions
We solve customers' problems and unlock new opportunities for our customers, suppliers, and RS Group. Our product and services solutions, many of which are innovative and digitally led, deliver efficiencies across the asset life cycle. We are driving an increase in customer lifetime value through stronger partnerships, which can generate additional and more sustainable revenue. Solutions now account for circa 23% of Group revenue and are moving us from a more transactional side of distribution towards developing strategic relationships. And the key for us here is leading with solutions that then pull through products, and that drives additional value for our Group.

One of our highest value-add solutions offer is our business process outsourcing business: IESA and Synovos, which will become RS Integrated Supply. We are the only integrated supply provider globally, and we have seen strong demand for our offer. There is also additional value from offering integrated supply customers of our IESA and Synovos, the RS range, RS PRO products, and we are also trialling an integrated supply light offer that we call RS Plus to our core RS customers. We are really excited about the opportunities, the demand, and the value that RS Integrated Supply brings to our Group.

Being easy to do business with
We are truly omni-channel, and although over 95% of our new customer journeys start online, customers want knowledge, experience, and expertise. They want to speak to someone that understands their business and knows what product or solution they may need, meaning the human interaction is key. 38% of our revenue is generated offline; and so, providing an omni-channel approach is a key differentiator and a growth driver for us. We are bringing and continue to bring a B2C experience to B2B customers by hiring digital specialists, improving website functionality, and using our insight to spend our marketing more wisely. Ultimately, this is driving improving returns.

The building blocks of our strategy remain unchanged, but we see greater opportunity within our journey to greatness through growing volumes to increase the share of customers' wallets; driving better operational efficiency; improving our pricing and procurement capabilities; and developing our solutions offer.

History of resilience: turning challenges into opportunities
However, the environment that we operate in today is uncertain, with inflation, supply, and economic pressures. But we have a long history of resilience and believe that challenges can become opportunities. On inflation, we see the opportunity to drive margin benefits through utilising detailed pricing tools and using product elasticity models. On the cost side, we are reengineering our supply routes to offset some of the freight inflation, and our improving labour productivity is helping offset some of the labour pressures. We have shown over the last two years that our experience can help offset many of the global supply challenges. We are leveraging our supplier relationships by bringing forward supply orders; increasing safety stocks; offering alternatives where possible; and utilising our global distribution centre network to source, store and deliver to our customers.

In summary, we are proud of what we have delivered to-date, but there is still significant market share opportunity for us to capture. We have a differentiated business model, but we can be great through focusing on our culture; customer experience; data and insight; solutions; and by executing brilliantly. We have a purpose-driven culture and vision with ESG embedded in all that we do. Our journey to greatness will deliver stronger revenue and higher quality profitable growth.

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