RS Group’s profits surge amid bumper demand for industrial products

Electronic goods distributor RS Group has seen interim profits rise by a third thanks to increasing orders for industrial products and price increases.

The FTSE 100 company, formerly known as Electrocomponents, saw operating profit rise 34 percent year-on-year to £187 million in the six months ended September.

Earnings were driven by a 16 percent increase in like-for-like revenue, supported by strong online trading and purchases of industrial products that outperformed the broader market.

However, the strong results weren’t enough to improve investor sentiment as shares tumbled on news that CEO Lindsley Ruth will be on leave.

Sales were further boosted by favorable currency movements and demand for RS Pro’s own brand offerings and electronics, despite weaker sales in semiconductors and passive components.

The Americas saw the biggest revenue growth, growing 38 percent to £461 million with an 80 percent increase in corporate profits.

There was also healthy growth in the British Isles, which the company attributed to rising prices and digital orders, and a greater focus on high-value B2B customers.

RS Group said trading in the first four weeks of October was in line with forecasts, even with a more challenging economic environment affecting consumers and businesses.

However, it noted that severe lockdowns in China and weaker volumes of single-board computing products continued to erode demand in the Asia-Pacific region.

David Egan, the company’s chief financial officer, said: “We continue to invest in our group to become stronger, more profitable and gain a greater market share. While we are aware of a slowing economic backdrop, we remain optimistic that we will continue to outperform the market.”

RS Group said its CEO Lindsley Ruth (pictured) would be taking leave for “personal reasons.”

The London-based electronics supplier stated that Egan had temporarily taken on the position of chief executive because Lindsley Ruth was taking leave for “personal reasons”.

This marks the second time American-born Ruth has taken time off from running RS Group, after making a brief stop to be treated for a medical condition in late 2019.

In an interview with The Times in April, he blamed the deterioration in his health on “doing the work of 20” people rather than delegating tasks properly to his employees.

RS Group gave no reason this time as to why he would go on leave, although Baroness Rona Fairhead, the company’s chairman and former head of the BBC Trust, assured investors that RS Group will “keep the good momentum in the business”.

She added: “The company has built a strong position for continued growth, with great people and a clear strategy that resonates with our customers and suppliers and delivers consistent gains in market share.”

RS Group shares were the second largest decliner behind BT Group on the FTSE 100 Index on Thursday, falling 7.8 percent to £8.81.

Founded in 1937 as Radiospares by two European emigrants, RS Group began making and selling spare parts for radios, and did the same for televisions after World War II.

In the mid-1960s, it expanded its reach to industrial customers and was listed on the London Stock Exchange under the name Electrocomponents.

RS Group eventually turned into a distributor of electrical and industrial goods from other companies, launching its website in 1998 and expanding its reach into the US with the acquisition of Allied Electronics.

Trade was hit hard by Covid-related lockdowns two years ago, but started to recover well as restrictions were eased and smaller rivals such as Synovos and Needlers were bought up.