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Hello, everyone, and thank you for joining the RS Group 2026-'27 Half Year Results Call. My name is Molly, and I will be coordinating your call today. [Operator Instructions]

I will now hand over to your host, Simon Pryce, to begin. Please go ahead.

Thanks, Molly. Good morning, everybody. Thanks for joining us today, and thank you for your continuing interest in RS, and welcome to the presentation of our interim results for the 6 months ended the 30th September 2026, which was a strong half for us where we delivered outperformance in all regions.

Our presentation this morning should take about 30 minutes, and we'll have time for questions at the end. But we're conscious that it's a busy day in the market, so we'll try to make sure everybody can get away by no later than 10:00. Presentation materials that we'll go through are already available on our website and the recording of the presentation and the subsequent question-and-answer session will also be available on the website later today.

But before we get into the detail of what was a pleasing first half, we always begin our meetings, as you know, at RS with the values or a health and safety moment. So this morning, I'd like to highlight our Protect What Matters global safety campaign that we launched across the group at the beginning of this financial year.

Health and safety has always been an area of focus for the group. We recognized in 2026 -- the financial year 2026 that we had some health and safety centers of excellence across the group that consistently outperformed other locations. Learning from them, we developed and launched Protect What Matters, a global program to remind all our teams that every colleague matters. And as a team of nearly 9,000 people around the globe, our joint responsibility to ensure that everybody returns home safely and at least as good a physical and mental condition as when they arrived at work. It encourages us all to look out for each other, to intervene, to speak up and to make safe choices every day and continues to be behind the drive and the focus on physical and mental well-being, both within and outside of RS.

[ So on to ] the presentation itself, I'll start by summarizing the half, and I'll also cover what we've seen going on in our markets. Kate will then take you through our first half financials, which are nicely ahead of expectations. She'll also explain what's driving performance at both the group and regional level, and we'll conclude with some modeling considerations for the second half. I'll then briefly touch on the good progress that we continue to make against our multiyear plan, highlighting the key things that we delivered in the first half and how we are positioned going into the second half as we start to realize some of the exciting RS potential that we've been talking.

So we delivered a strong first half with building quarter-on-quarter momentum and outperformance across all regions, which Kate will dig into shortly. The group returned to growth with revenue up 10% and 7% on a like-for-like basis. Effective pricing, cost discipline and better commercial execution led to a 70 basis point like-for-like increase in our operating profit margins to 9.2% and adjusted profit before tax was up 17%.

The strategic investments we've made over the last couple of years are beginning to deliver, supported by a solid performance from our growth drivers of RS PRO, services and solutions and digital, and we continue to allocate capital in a disciplined manner, further investing in the business to support future growth and efficiency, increasing our interim dividend by 2%, repurchasing GBP 35 million shares (sic) [ GBP 35 million of shares ] as part of our ongoing GBP 100 million share buyback program. And this leaves us with a strong balance sheet with plenty of capacity to pursue a solid pipeline of potentially value-accretive M&A opportunities and financials that are pleasingly ahead of expectations.

One encouraging aspect of the first half was the improvement we saw in our end markets. As the chart on the left shows and as flagged at our prelims in May, markets stabilized in the second half of our last financial year. And pleasingly, and despite continued geopolitical and macroeconomic volatility, PMIs have generally continued to strengthen so far this year and have consistently been in expansion territory across all our major markets. And we've talked in the past about the lag correlation between PMI and RS' organic revenue growth. As the chart on the right shows, whilst that remains true, we are now also benefiting from the momentum generated by investments that we've made to strengthen our proposition and to enhance our capabilities, which are all beginning to deliver results.

In the appendix, we've included the usual charts, which shows this reflected in our continued share gain across virtually all of our product categories. Interestingly, though, and whilst we are seeing accelerated demand in some industry verticals with strong structural growth drivers such as new energy, pharma and data center suppliers, the recovery is quite broad-based across most industry verticals that we serve. So subject to any future macro shocks, I think it's safe to say that our markets have now moved into a recovery.

I'll now hand over to Kate, who's going to take you through a bit more detail on what's driving the performance, both at a group and a regional level as well as some modeling considerations for the second half.

Thank you, Simon, and good morning, everyone. I'd like to echo what Simon has said, we have made significant progress against our strategic priorities. And while the external environment is becoming increasingly supportive, the business is in a far stronger position than it was 2 years ago. That momentum is evident in our first half performance. We delivered healthy top line growth, improved profitability and margin expansion while maintaining disciplined control of pricing, costs and working capital.

Simon has already highlighted our revenue and profit performance, so I'll summarize briefly the highlights in cash and capital. Cash generation remains strong with adjusted operating cash flow conversion of 96%, supported by disciplined working capital management, including appropriate inventory investments to support increased customer demand.

Improved profitability, combined with strong cash control, supported an increase in return on capital employed to 16.5%. And consistent with the progressive dividend policy, we have increased the interim dividend by 2%. We have executed GBP 35 million of share buybacks during the period and our leverage is at 1.1x net debt to EBITDA, providing flexibility and capacity to support both organic and inorganic future growth.

As you can see from the bridge, revenue increased 10% with like-for-like revenue growth of 7%. This was driven by a combination of volume recovery and pricing actions with volumes contributing around 4 percentage points and price contributing around 3 percentage points. We have benefited from the recovery of the temporary disruption post the rollout of the digital platform in the U.S. and the distribution center closure in EMEA. Inorganic investments added GBP 33 million of revenue in the period.

Revenue growth was most evident in average order value, which increased by 10% to GBP 293. The drivers behind the increase include pricing actions, greater customer spend consolidation, particularly within EMEA and growth in larger orders as a proportion in the Americas. Digital revenue increased 5%. Services and Solutions grew 6% on a like-for-like basis, both supported by continued growth in our strategic procurement solutions. RS PRO grew 5% on a like-for-like basis, with particular strength in APAC and encouraging growth in the Americas. This reflects the strength of our differentiated position and the benefits of our ongoing investments in customer-facing digital capabilities.

Turning to our adjusted operating costs. As you can see, adjusted operating costs increased 9% to GBP 528 million and represents 34.2% of revenue, which is broadly consistent with prior year. Adjusted for ForEx and prior year one-offs and removing restructuring and integration costs, our ongoing cost base starts at GBP 486 million. Here is where I provide you with a bit more detail on our operating cost base and how it responds to changes in revenue. So let me take a moment to explain the hashed bar.

First, I isolate organic OpEx being in-year OpEx investments we are making to deliver our strategy. This was GBP 18 million both this half and for the same period last year. Much of this investment is on our digital replatforming projects and increased spend on the process and operational excellence program.

Of the remaining run cost of GBP 468 million, our analysis tells us 43% moved with revenue and 57% is fixed. So in the half itself, as revenue increased by GBP 101 million, variable costs increased by GBP 15 million. These costs include freight and packaging, variable warehouse costs, marketing, field sales and customer services. The increase as a proportion of revenue is slightly elevated because of the increase in freight costs associated with higher energy costs. Fixed costs increased by GBP 17 million, including underlying inflation and rebasing of our long-term share-based employee incentives. Employee in-year incentive cost accruals increased by approximately GBP 7 million in the first half, reflecting stronger-than-expected performance.

These increases were partly offset by continued restructuring and integration benefits of GBP 8 million, which more than covered the costs required to deliver this. We have now delivered GBP 64 million of recurring benefits, which has a net cost to deliver of GBP 21 million. We spent GBP 18 million on organic OpEx in the first half, which is the same as H1 last year. We continue to balance cost investments to support revenue growth and the delivery of operating leverage. The step change in process efficiency to realize cost savings and improve operating leverage is expected to take around 3 years to deliver with benefits weighted to the back of that period.

Looking at operating margin on a comparable basis, which isolates acquisition impact and one-offs, we delivered a strong 100 basis point improvement in operating margin in the 6-month period. Gross margin expansion contributed around 70 basis points of benefit, reflecting our progress on strategic pricing initiatives and robust inventory management. Revenue growth and the resulting operating leverage contributed a further 130 basis points. Higher fixed costs combined with cost reduction actions reduced net margins by 50 basis points, and we have increased annual incentive cost accruals to reflect the better-than-expected financial performance. The inclusion of BPX reduced operating margin by 20 basis points, such that adjusted operating margin outturned at 9.2% for the half.

EMEA delivered a strong return to growth with like-for-like revenue up 5% and momentum accelerating through the half as market conditions improved. Volume growth returned, complemented by targeted pricing actions and continued share gains. Manufacturing sentiment strengthened across our key markets with PMI levels moving sustainably above 50, supporting a recovery in customer demand.

Growth was broad-based across product categories, while all customer segments increased. Our high potential corporate customers grew 9% like-for-like, reflecting the benefits of our targeted customer proposition, enhanced sales execution and deeper customer engagement. Digital revenues increased 5%, driven by our procurement solutions platform, while RS PRO grew 4%. Gross margin was broadly stable year-on-year. Operating margin improved to 10.4%, reflecting good operational leverage.

It's worth taking a deeper look into EMEA to highlight the progress we are making across our major markets. And these charts show 6 quarters of revenue performance. The dotted line indicates when PMI turned from negative to positive. And as you can see, all markets returned to growth by the fourth quarter. Thematically, the region is executing well against the strategy and making use of the customer data-led tools that we're rolling out.

There is also a clear recovery in previously challenged markets, notably DACH and rest of EMEA, which have also benefited from orders returning post the distribution center closure last year. While on the face of it, the growth in France optically slowed, this remains a good performance given the market share gains France achieved during more challenging periods.

Investments in our proposition continue to gain traction, helping to differentiate our offer, deepen customer relationships and create new growth opportunities. As PMIs remain in positive territory and customer activity builds, we are seeing higher order values and broader-based growth, increasing our confidence in EMEA's momentum and ability to capitalize on a recovering market.

Turning to the Americas. Americas delivered a strong performance with revenue up 9%. Growth was visible across the region, driven by volume, strategic pricing actions and continued commercial execution. In the U.S. and Canada, revenue grew 12% on a like-for-like basis, of which [indiscernible] attributed last year of the digital commerce platform. This demonstrates a healthy underlying trend with performance supported by targeted supplier programs, enhanced sales execution and improving digital performance.

Web revenue was up 13%. Services and solutions continued to gain traction, reflecting growing customer demand for technical support and customer order capabilities. And RS PRO grew by 30%, albeit from a low base. Mexico delivered 9% growth with recovery accelerating through the period. Underlying demand strengthened and larger capital projects that have been deferred amid trade-related uncertainty have increasingly moved into execution, supporting improved momentum.

Profitability improved significantly with gross margin increasing 110 basis points through pricing initiatives, discount optimization and inventory provision favorability. Combined with disciplined cost control, this drove a 25% increase in operating profit to GBP 44 million and 120 basis point improvement in operating margin to 9.4%.

Asia Pacific delivered an excellent performance with revenue up 15%, driven primarily by 12% volume growth supported by a favorable demand environment. Momentum accelerated through the half, benefiting from continued investments in AI infrastructure and data center expansion across the region, while all our core categories were in growth, there was particular strength in semis and passives. Greater China and Southeast Asia were standout performers, while Japan and Korea also delivered strong double-digit growth. Australia and New Zealand delivered 1% growth, primarily reflecting softer market conditions and a reduction in demand from the oil and gas sector in Australia.

Across the region, our strategic sales, digital and marketing initiatives drove digital revenue up 12% and RS PRO grew 16% on a like-for-like basis, highlighting the strength of our proposition and continued market traction. Operating profit more than doubled with operating margin improving to 6.2% as the region delivered operating leverage through cost control.

Adjusted free cash flow increased to GBP 93 million, up from GBP 86 million last year, reflecting higher operating profit, partially offset by additional investments in working capital to support growth. Despite stronger trading, we maintained tight control of working capital, which as a percentage of revenue remained stable at around 24%, while inventory turns were maintained at 2.7x. This demonstrates the discipline with which we are managing stock levels, ensuring we can support customer demand while continuing to generate strong cash returns. As a result, adjusted operating cash flow conversion was 96%.

Net capital expenditure reduced modestly to GBP 23 million from GBP 25 million last year, largely reflecting the completion of our product management system investment and the phasing of our Italy and Ireland distribution center relocation. Net debt increased by GBP 40 million, principally reflecting lease additions. The share buyback and dividends have been largely funded by cash generated from operations. As I've already mentioned, leverage remains at the lower end of our target range at 1.1x net debt to adjusted EBITDA, providing significant financial flexibility.

We have shown this slide before, so I'm not going to spend too much time on it other than to reiterate our disciplined approach to capital allocation. We continue to invest organically in the business, funding the capabilities, technology and infrastructure that support long-term growth. We have an increasingly healthy M&A pipeline, and we'll continue to be value disciplined in our pursuit of opportunities that are strategically compelling and meet our financial criteria. And we remain committed to progressive dividend growth with today's dividend calculated mechanistically at around 40% of the prior year full dividend. Finally, we continue to return surplus capital to shareholders through our share buyback program. This balanced approach ensures we can invest for growth while maintaining a strong balance sheet and delivering attractive shareholder returns.

And finally, this slide aims to give a bit of color as to what to expect in the second half of the year. Gross margin is expected to be stable. As per our definition on the cost slide earlier, ongoing run costs exclude discrete organic OpEx investments we are making. We expect variable and semi-variable costs to be consistent with H1 levels at around 14% of revenue. These costs are currently 43% of the run cost base. We expect H2 '26-'27 fixed costs to grow by 7% versus the prior period, net of cost savings. These are currently 57% of the ongoing run cost base. The guidance we gave with the full year results in May hold for the organic investment, which will accelerate in H2 as well as the restructuring and integration costs and capital expenditure. Overall, our cost outlook remains controlled, balancing investment for future growth with disciplined cost management and ongoing productivity optimization.

And with that, I'll hand back to Simon.

Thanks, Kate. So as you know, we set out our 5-year plan just over 2 years ago to introduce more agility, more connection and greater scalability into our business to support accelerated growth with increased automation and to materially improve productivity and operational efficiency across the group. And a lot of good stuff has been going on since.

The wheel on the left shows the 5 main areas that we're focusing on. Much of our initial investment has been on strengthening our customer-facing capability and core technology foundations, which I'll talk to in a bit. But in the first half of this year, as the shading shows in the wheel, the GBP 23 million of capital and GBP 18 million of OpEx investment that Kate just referred to has shifted more to improve our customer experience and to accelerate operational efficiency and excellence.

On the right-hand side of the slide is the investment road map that we shared with you in May that sets out all the major initiatives that are embedded in our plans. And pleasingly, we continue to make good progress and all of those programs remain broadly on track, some of our early investments already beginning to deliver. And in the next couple of slides, we'll go into a deeper dive in those areas where we're seeing real progress.

At the beginning of Q2, we connected our customer platforms, which provides us with the foundation of a connected customer intelligence capability. We've begun optimizing and automating data flows between those platforms and have already used this intelligence to launch 12 automated sales campaigns, enabling the immediate creation and activation of leads and opportunities. We've also launched our first supplier-sponsored campaign, combining customer segmentation, personalized digital content and automated targeted communications.

We're embedding AI across these platforms, which is helping us to process data and identify opportunities faster and to enhance personalization and marketing effectiveness. Together, these capabilities are strengthening customer acquisition, increasing share of wallet and supporting more effective commercial decision-making across the group as we start to turn our unique customer data into accelerated growth.

Investments made in the first half to enhance our customer journey are also using AI to deliver smarter customer experience. AI is helping customers find relevant products more quickly and easily, and we're using it to enhance traditional search and also to develop conversational search to further improve our discoverability. We're localizing some of our SEO capabilities with the creation of 4 hubs in our major markets, which will allow for more personalization and relevant merchandising and strengthening our presence across both traditional and AI-enabled search as customers' buying behaviors continue to evolve, ensuring that we remain relevant and are more relevant and accessible across all channels that we serve customers through.

We continue to tune our upgraded digital commerce engine in the U.S., where, as you heard a little earlier, web sales are up 13%. And the next version, which represents a material upgrade is now in live testing and ready for launch in Switzerland in Q1 next year and for more broader market-by-market rollout thereafter. And through AI and digital innovation, we are constantly enhancing our digital experience, enabling faster development, improved agility, greater personalization and enhanced customer engagement.

In services, we made good progress in the half in our technology-enabled procurement and outsourcing solutions. EProc revenue increased by 8% on a like-for-like basis. And during the period, we rolled out our upgraded PurchasingManager platform across Europe, improving functionality and customer engagement. We have deployment plans for PurchasingManager across APAC and Americas next.

In Mexico, we successfully deployed a new SaaS-based eProcurement model for project customers, helping them to improve purchasing control, compliance and providing spend visibility whilst reducing implementation [indiscernible]. This SaaS version of eProc is more scalable and creates a great opportunity to expand eProcurement adoption into our project-based customers as well as to our MRO customers over time.

And in RS Integrated Supply, we continued enhancing our RS Sync proprietary inventory management and procurement processing platform with AI-enabled parts identification, a global data cleansing solution, improved multisite inventory visibility and curated customer marketplaces. And all of these developments are creating much deeper customer engagement and integration.

Alongside our customer-facing initiatives, we've continued to invest in the physical and process infrastructure of the group. During the half, we made good progress upgrading our distribution centers in both Ireland and Italy, where we expect to transition to our new sites in the second half. This will provide a safer and more efficient working environment in those markets as well as providing additional capacity to support future growth across EMEA. In support of our DC move in Italy, we've also developed and are now deploying our next-generation approach to automation and warehouse management. And this will become the template for future automation across all our regional distribution centers.

We also progressed our process and operating excellence program with data harmonization going well, and we've now moved into detailed process design phase well in advance of a phased rollout that's not expected to start until 2028. This will allow simplification and automation of processes and also allows us to start the next phase of technology and maintenance cost reduction, improved supply chain and back-office efficiency, which will ultimately lead to a lower cost and more scalable operating platform that will support future growth and improved sustainability and efficiency.

And so to conclude, as I hope today's presentation demonstrates, I'm pleased with these results, which are beginning to reflect the strategic progress that we're making. Our strong performance is driven in part by improving markets, but also by share gain by cost discipline and improving commercial execution. Whilst mindful of macroeconomic and geopolitical uncertainty, PMIs across our major markets remain in positive territory and support the encouraging momentum we have going into the second half, although we must not forget that comparators do get a bit more challenging.

As we are increasingly demonstrating, our markets continue to have attractive through-cycle growth characteristics, supported by strong growth drivers and our differentiated proposition positions us well to take advantage of an increasingly data and AI-enabled world and more fragmented supply chains.

Our strategy and investment plans are sound, and we're executing effectively. And some of the strategic investments we've made over the last couple of years are really beginning to deliver. Continue to demonstrate solid cash generation characteristics and disciplined capital deployment with a strong balance sheet that supports continued organic investment and a solid pipeline of potential consolidation opportunities to accelerate that growth, subject, of course, to value accretion.

And after a good first half, we enter the second half with encouraging momentum and are well positioned for continued progress, all of which gives me further confidence in the RS value creation opportunity and in our medium-term financial targets that are set out on the right of the slide.

That's the end of the formal presentation, and thank you for listening. We're now happy to take any questions you might have. And so I'm going to hand you back to the operator, Molly, who will facilitate the Q&A session.

[Operator Instructions] We have our first question from Thomas Callan at Investec.

Two from me, please. Firstly, just on the updated OpEx guidance. I just wondered if you could give us a bit more color as to how we should be thinking about that fixed cost component in FY '28.

And then just on like-for-like, I just wondered if you could give us a flavor as to the Q2 exit rates by region, just so we have a better idea as to what to assume around the top line for H2.

Thanks. I'll let Kate take OpEx, and then I'll take the like-for-like exit rate very briefly.

I'll do the OpEx first. Sorry, I wasn't sure whether [ you gave me ] the second one. With regards to fixed costs, I recognize that I'm kind of asking you guys to refresh your models a bit. What I would focus on in '28 is that ratio split, the 43% to 57%. I mean, clearly, inflationary pressures continue to be a thing that we are all collectively managing.

The one thing, though, that I would point to in '28 is if you look at the ratio between depreciation and CapEx, we're currently running at around GBP 40 million depreciation versus the CapEx spend that's been sitting at GBP 50 million for a few years, and I expect that to catch up. That's probably the only kind of real change I see '27 into '28 that you need to factor into. Otherwise, it will be around cost inflation and then that ratio that I've talked to before.

And on the momentum going into the second half by region, Tom, it won't surprise you, we don't guide to that. But there were some clues in the -- there are some clues in our announcement today. We do refer to building momentum. So we have seen improving growth in all regions Q-on-Q, and that momentum remains pretty strong exiting the half. We shouldn't forget, though, comparators do get a bit more difficult in the second half. And so whilst there are some slight tweaks around the respective strength of that momentum, I think all the clues for the second half are sort of set up relatively clearly.

Our next question comes from David Brockton at Deutsche Numis.

A few questions from me, please. Firstly, just in terms of product range. When I look at the growth, it seems to be electronics and A&C led with MRO, I guess, PPE, et cetera, still somewhat lagging. Is your sense that the MRO component starts to pick up given that lag to PMIs? And within A&C, what does the book-to-bill look like in the Americas?

Second question, just in respect of Mexico. You eloquently set out how there was a transactional headwind to the Mexican performance in the second half of last year. Can you confirm whether that transactional headwind still impacted the group in Mexico through H1 and therefore, was the like-for-like ex-ing that even better?

And then the final question, a minor one, just in terms of the GBP 1 million exceptional cost, which I think was for an acquisition. Can you confirm whether that's an acquisition that didn't complete or an acquisition that's ongoing?

Tom, on product range, you're right that A&C and certain elements of electronics are growing quite strongly. But actually, if you look at all the product range, we're growing in virtually all of them at relatively decent pace. So I do think that there is a little bit of catch-up going on, but also we are supplying into industries that do have structural growth drivers with our automation and our electronics product range.

I don't see -- I mean, there has been a pick-up in things that would be traditionally associated with MRO. I'm not sure that I see any great acceleration. I don't actually see any great slowdown either. So it does feel to me that -- and we do look at our growth not just by range, but by industry vertical across the globe. This is a pretty widespread recovery now. There are pockets of industry verticals that are growing faster than the rest, but it is pretty broad range, and you're seeing that also reflected in the growth in our product categories.

On the GBP 1 million acquisition, we have a pipeline of stuff that we -- I don't really have anything to add to the GBP 1 million of acquisition-related costs. There will always be something there whether we buy anything or we don't. And then Mexico, Kate?

Yes. So on Mexico, David, it's become very clear to us in Mexico that this is a dollar-denominated business and has become progressively even more so. So as a result, the results you see here treat Mexico as dollar-denominated and are therefore a true reflection of the half-on-half performance. So there is no further FX noise related to that. And for modeling considerations going forward, you should treat Mexico as dollar denominated.

And I just might add on Mexico, David. Mexico did go through a period where a lot of the larger capital investment projects were delayed as a result of ongoing trade negotiations between America -- between the U.S. and Mexico. Towards the end of the half, we did see that start to unwind. And therefore, quite pleased with what's going on in Mexico in Q2 and book-to-bill looks pretty good going into Q3 and Q4. And also, you talked about book-to-bill in America, similarly looks quite good going into Q3 and Q4.

Just as a follow-up on that, Mexico, was the provision movement related to the Mexican range, i.e., the pick-up in Mexico has helped from a provision release for gross margins in the Americas?

No, nothing.

No, nothing.

And basically, just when we talk about provisions and inventory, basically, we -- our inventory provision is worked on historic sell-through. That's how we calculate it. So that's what -- when that sell-through gets updated, that's what changes the provision dynamics.

No material impact.

Our next question comes from Jane Sparrow at JPMorgan.

Two questions, please. Just firstly, how do you measure whether things like the AOV increase and some of the other metrics you've highlighted is improving, but they're due to the investments that you've been making in areas such as connected platforms and AI versus it just being a feature of kind of this stage of the cycle. Can you sort of track those specific marketing campaigns and see that they're outperforming what your usual marketing campaigns are, et cetera? So just a bit of color there, please.

And then the second one, just a follow-up on the question on inventory provisions, perhaps more generally. Can you just quantify the impact of inventory provisions on gross margin year-on-year in first half? And then I think last year in the second half, you had a bit of benefit from inventory provisions. So can you just again remind me of what the year-on-year impact of that will be in the second half on gross margin, just specifically on inventory provision?

Thanks, Jane. I'll take the first question, and then Kate will pick up the inventory provisioning question. So I think we look at all sorts of performance measures, both on a macro and a micro level, to determine whether the strategic investments in our customer data and enablement are working or not.

We did talk -- as Kate talked about, we talked on the fact that our average order value has gone from sort of GBP 250 to north of GBP 290. A chunk of that is due to some larger orders in America, but also broader range, increased share across very specific customers. We also look at growth by customer type and against -- now against the potential we believe that they can deliver to us. So we are now measuring our salespeople on their ability to sell to potential rather than just absolute sales.

We also look at people's digital journey. We look at basket-to-order conversion. We look at order-to-checkout conversion. And that's how we're looking at the impact of both the larger investments that we made. And then we're also -- like these 12 campaigns I talked about, we actually look at individual campaigns and the returns they generate. So we're measuring all of this stuff relatively granularly. And as you might expect, the lawyers wouldn't allow us to say some of these things unless there was evidence that they were backed by fact. Margins?

Margins. So just to clarify, your question was specifically on inventory provisions. Is that right? Or was it a broader margin question?

Yes. Well, feel free to answer the second bit as well. But yes, specifically gross margin impact year-on-year of inventory provisions in the first half and then what we should expect for the second half?

So last year, we were probably a couple of million heavier in inventory provisions of H1 '26 and a couple of -- and that unwound in H2 '26. So when I look at gross margin last year, I think the full year is the best representative of what we've achieved relevant of our provisions as the two balance each other out. And we've got a pretty clean view of that when I look at H1 '27, which is why when I guide to gross margins, I look at that as a flat position.

If you're looking at with regards to operating margins, there's probably a few tens of basis points benefit of that in H2 last year to the detriment of H1 last year, which again flattened out by the time we got to the end of the year.

Our next question comes from Rory McKenzie at UBS.

It's Rory here. Two questions, please. Firstly, on growth. I don't want to seem churlish at all as 7% is a good number. But all 3 of what you previously called your growth accelerators, so digital, service and solutions and RS PRO, all grew a bit below the group average. Is that just a function of regional mix? Or what else does that tell us about where the growth is coming from?

And maybe especially, there's obviously been a lot of debate this year around how LLMs are changing customer acquisition channels, the potential adoption of agentic procurement tools. So maybe especially, is there anything you're tracking or aware of that's affecting the digital growth at all?

And then the second area of my question was on margins. And I appreciate you've given a lot of detail about where and why costs are growing, but that does limit operating leverage for now. I think your incremental conversion margins were about 31% in H1 compared to perhaps the 45% to 50% that we've seen in other good cycles. How long do you think it can take before your group gets back to a position where you can drive that ongoing margin expansion?

Thanks, Rory. On the growth drivers and what's going on there, you're right that the growth accelerators are marginally behind the group rate of growth at a global level. If you break it down into the regions, for example, RS PRO, strong growth in Americas and Asia Pacific, slower growth in Europe. That is more driven by the underlying broad-based demand and getting our RS PRO product range positioned in the right place. So I'm not worried about the short-term slightly slower growth in RS PRO. There's still lots of potential for further RS PRO growth, particularly in America and in Asia Pacific, but also across Europe.

On digital, a chunk of that is due to the recovery that we're seeing in our digital search engine in North America, but mainly because we have introduced some increased minimum order charges and some increased freight costs, which has resulted in, as expected, a reduction in some of our more transactional customers across the web. At a macro level, we're spending a lot of time making sure that we're increasingly, and very relevant to all customers, searching across all channels. We have built -- we are building and continue to invest in capabilities around our product data and how we present ourselves to make us more findable and discoverable for people searching through large language models and all that sort of stuff.

And then on our services and solutions, a lot of that is the ongoing repositioning of RSIS. So net-net, we are marginally behind on those growth drivers in the first half, but I don't think that's got anything to do with the structural decline of how important they are, and we're continuing to invest behind them. And I would expect their growth to pick up going into the second half and beyond. Margin?

So with regard -- our mid-teens margin is predicated on getting operating leverage into what we believe the organization is capable of. I didn't quite follow all the numbers that you quoted. But if you're going back to '22, '23, just something to remember as well, in that period of extraordinary demand post the COVID relief, there was very high gross margins as well and that, so was part of what was driving that drop-through. We're not signaling gross margins getting to that degree again.

We do monitor drop-throughs very, very closely. A key enabler to us really accelerating our operating leverage capability is the replatforming of the ERP, digital commerce front-end and the warehouse management systems. That work is underway. It really accelerates over the next 3-year period, and we will be launching it market by market with a very big market to the back end of that period, ensuring that we make sure our customer experience is enhanced and protected. So I expect the real kind of step change in the dynamic to be post that rollout.

And Rory, I think we were very clear -- tried to be very clear in our Capital Markets Day back in September 2024 of how the operating margin would develop in the group. I don't think we've materially changed that. We're entering a phase now of expenditure around our process and operational excellence that Kate referred to, which is this next wave of improvement and efficiency enhancement. But you won't see the benefits of that come through for 2 or 3 years as Kate has described. But the operating leverage in the business ex those one-off invest -- multiyear but one-off investments we're making, I'm very comfortable...

Our next question comes from William Blunt at Rothschild & Co.

The first is just on the high potential accounts that you were talking about earlier. I think the statement says they were growing 11%, so quite a lot ahead of the group. Could you just give us some more information on exactly how you're defining that group and roughly what proportion of sales they represent?

And then secondly, I think the statement calls out data centers as a growth driver, I think, for the first time. Could you maybe give us an update on your exposure there? And is this mainly project-related demand? Or are you also building out a recurring maintenance business for that end market as well?

So can you just repeat the second question, William? Was that about data centers?

It was, yes. It was...

Yes. No, I got it. Thanks. Look, on high potential customers, we used to classify customers by the amount of spend they've incurred historically over the prior 12 months. We now define customers by the potential we believe we have to sell into them.

So the way we've done that is through connecting our customer data platforms and standardizing our customer data across the globe. We are able to look at on a micro segmented basis, customers by all sorts of different dimensions. We then compare the most we sell to those micro segmented customers with the amount we actually sell, and that gives us our potential. It's not fantastically scientific, but it's a lot better way of assessing potential than looking at historical sales data.

In terms of our high potential customers, the potential in them is significant and a large part of our future growth. In terms of the high potential customers today, off the top of my head, I don't know, but it will be -- I'm guessing it's around 25% of revenue. But I'm just -- I've got Carla next to me who's now scrambling around to try and find the data. And if we can get it before the end of the call, we'll tell you whether the CEO's estimate is right or wrong. Otherwise, we'll let you know after the call.

And then on data centers, you're right, we don't generally across the globe supply into new builds. And therefore, the level of accelerated investments going on today in data centers we don't supply into directly because we are primarily an MRO supplier. However, we also do quite a lot of project work for people who are undertaking small project builds in the electronics space. A lot of these people are panel builders.

And the reason we are a good supplier to them is they often order in the same way that MRO demand. So it's relatively short lead time, high availability, high service. And actually, quite a lot of those panel builders are supplying into the accelerated growth of data centers and the power generation connection that goes around. So we are seeing some of our growth into those panel builders being as a result of the demand in data centers and the capital investment in those data centers.

So it's probably 6% or 7% of group total today, something like that, and that would have been up from 3% or 4% of group total last year. So important tailwinds, but doesn't move the needle massively, but an area we're continuing to focus on. And of course, once these things are built, they need MROs, and we see quite a lot of that in those country markets where we have an established data center infrastructure that [indiscernible]. And I'm just -- somebody just flagged, the high potential stuff is about 25% of our business today, but it's probably 3/4 of our potential.

Our final question today comes from Emanuele Sartori at Kepler.

Just a couple, please. Just one question on the volume. Obviously, you mentioned EMEA up 3% and APAC up 12%. Just getting my numbers right, if I missed it, sorry. Could you just break it down for Americas as well? And more importantly, how did volumes develop through, let's say, Q1 and Q2? And maybe if you could elaborate a bit on into October and exit into H2?

And then my second question is on BPH -- BPX, sorry, profitability with the revenue contribution around GBP 33 million and GBP 0.4 million of operating profit. Is that representative of the underlying profitability? Or are there some temporary integration costs, investment or seasonality affecting the contribution?

Thanks, Emanuele. Kate, volume for us in Americas?

So I'm not seeing a significant difference between Q1 and Q2 in terms of what's going on in volume and price. With regards to, I think, the group position that we gave is 3% price to 4% volume. If I split that by region, APAC is much higher volume, a bit lower price. EMEA is fairly even, 2% and a bit is price and 2% a bit more volume. It's our EMEA [ split ]. And the Americas is pretty evenly split as well between price and volume. So not much more to say on that. I would say broadly price is slightly higher in Americas than it is in both EMEA and APAC.

Yes, the joys of tariffs. And Emanuele, I think I don't want to repeat what I said on exit rates. I think we did say building momentum. So clearly getting a bit better Q1, Q2 and encouraging start to Q3, but the comparators do get a bit more challenging in the second half. So probably all we're going to say on exit rates.

And then on BPX is a lower margin model and always was. I think we do see some opportunity to improve their operating margins through integration over time. But I wouldn't expect that to change materially. And I don't think there were massive integration costs in the first half. So it is just a technical [indiscernible] lower, and we need to work at them over time to get them to a level where we think they are more naturally suited. We saw the same in Risoul, which is a not too dissimilar business. So nothing to worry about there and is quite a good opportunity. And I'm excited about the BPX acquisition actually. Pleased to see how that business is developing within the RS Group, and I see lots of potential for it.

Our last question comes from Lacie Midgley at Bloomberg.

I did have one on data centers, but you answered that very helpfully previously. I guess just thinking about the supplier data you gave, I mean, it gives fairly broad evidence of the share gains that you had across most major categories. But can you quantify the magnitude of those gains maybe across that GBP 670 million revenue sample, give us maybe a sense of how much of the first half like-for-like growth was kind of market recovery versus RS-specific kind of share capture, that would be helpful to finish on, if that's right.

Yes, that's the most difficult question to finish on. Thanks a lot for that. I think everybody -- market -- defining our market is quite complicated because you need to really get into segmenting product categories by use case, by end user market, by vertical, all that sort of stuff.

I think if we just stand back the way we look at it internally, at a group level, of our 7% underlying revenue growth reported in the first half, probably 1% is catch-up from the operational adjustments that we made last year that impacted our top line. So you're then left with 6%. And that 6% broadly divides about 3% there -- or thereabouts, on pricing and 3% or thereabouts on volume.

And on the volume side of things, it sort of feels like about half of that is market and half is share gain. But it's very difficult to be more precise than that without getting into all sorts of detail about customer potential, category potential and all that sort of stuff. So hopefully, that gives you a bit of a feel for what we're seeing internally around that share gain versus market.

I will now hand back to Simon Pryce for any closing remarks.

Thanks, Molly. Thanks, everybody, for listening, and we look forward to seeing you out and about. And with that, we'll close today's presentation. Thank you.

Thank you for joining the call. This concludes today's call. You may now disconnect your lines.

So good morning, everybody. Welcome to the RS Group Preliminary Results Presentation for the year ended 31st of March 2026, which was a year for us of good progress and building momentum. Thanks for joining us here today at the Teneo offices and thank you for your continuing interest in RS.

Our presentation should take about 30 minutes today, and we'll leave some time at the end for questions, but we'll try and make sure everybody gets away by no later than 10:00. The presentation materials are already available on our website. There are some hard copies in the room and a recording of this presentation, and the Q&A will be available on that website later today.

But before we start, we always begin our meetings at RS with a health and safety moment. So, there are no planned fire drills today. The fire exit is through the door on my right. Don't take the lift, take the stairs to the left of the list and assemble outside the building. At RS, we also start each of our meetings with a values moment. And I'd just like to take this opportunity to call out that as one team delivering brilliantly, doing the right thing and making every day better, recognizing the efforts of our RS colleagues across the world who, for the last 2 weeks, have taken part in an Active for Change Challenge. And in 2 weeks, they've actually walked 36,000 miles between them, which is the equivalent of going around the world 1.5x. And that's all to raise funds for our new social impact partner, SolarAid, that delivers clean and safe solar lights and power to over 150,000 people living in rural communities without the access to electricity in sub-Saharan Africa. So, they've been around the world 1.5x. Goodness knows how many times they'll get around the world by the time they finish their challenge.

So, on to the meat of the presentation this morning. I'm going to start by summarizing that good progress and building momentum that I referred to earlier. Kate is then going to run through our financials that were in line or slightly ahead of expectations, and she'll also take us through what's driving them, both at group and regional level. I'll then remind you of the multiyear journey that we're on, share with you in a bit more detail where we are and on that journey and the progress that we're seeing and also where our major initiatives are going to be for 2027 as we continue to improve RS and to deliver on the significant value creation opportunity here.

And then I'll conclude with how a couple of years of this disciplined execution is increasing our confidence in our ability to deliver against those medium-term financial targets and sustainable returns that we shared with you over the last year or so. So, to that good year of more disciplined strategic execution and strong operational discipline. In challenging markets, as you'll hear from Kate in a minute, we delivered a resilient financial performance that was in line with our marginally ahead of expectations. Volumes were slightly down, but revenue was flat through good pricing discipline, which also led to improved gross margins and costs were well controlled. And as a result, operating margins were maintained. We're 2 years into this multiyear value acceleration plan, and we continue to make strategic and operational investments in the business that are already beginning to deliver.

As you can see from the slide, our growth in drivers of RS PRO and our solutions and services grew well ahead of the rest of the group. And even in digital, where we did see a small decline in the year, this was in part due to some of the short-term disruption arising from the enhancements and the technology upgrades that we're making to improve our customer experience and digital is already back in growth.

Our internal and external data tells us that we're continuing to outperform in most of our markets and in most of our component categories. And we saw sequential improvement, both in sentiment and performance across the year, particularly in Q3 and Q4, and this is despite the quite challenging macro environment and the difficult market environment that that's creating.

We acquired BPX in March for an acquisition consideration of up to about GBP 30 million. And we've also got a good M&A pipeline, but excellent cash generation and a very strong balance sheet means that we've got more than sufficient financing capacity at this point in the cycle to execute both our organic investment program and to enhance it with value-creative acquisitions. So, in line with our disciplined approach to capital structure and allocation, we will, therefore, be returning an additional GBP 100 million back to shareholders by way of a buyback program, which we started this morning.

And therefore, we enter the next financial year with attractive and building momentum, notwithstanding the quite challenging macro environment that remains out there. So, we set out our multiyear plan about 2 years ago, and there's still a lot to do at RS, but our great people have embraced the change journey that we're on, and I'm really pleased with the progress that we've made. You'll recognize the diagram on the left-hand side of this slide, highlighting where we're making strategic investments and in the 5 areas. And later in the presentation, I'll share with you a bit more detail of what those investments actually are.

I'll also explain the colored banding, and I'll talk about where the focus of our investment will be in FY '27. The Gantt chart on the right is the summary of the plan we're executing, which hasn't really changed since we launched it. It shows at a high level where we're investing and importantly, where we expect those investments to start delivering. And I know it's a bit of an eye chart, but when you get your rulers out and dig into it, what it should show you is that after a lot of foundational investment, particularly in customers, experience, product and supply chain. In FY '27, we're now moving into activation phase, and we're already beginning to see some of the benefits of the investments that we've made over the last couple of years.

You'll also have seen these charts before. And as we've highlighted, PMI data, which is the gray bars on the chart on the left, typically lagged by 3 to 6 months is a pretty good indicator of whether RS has a headwind or a tailwind for its revenue growth, which is the red line on that chart. And despite that tough and volatile macro that we've referred to, the chart shows actually PMI data has been surprisingly stable over the last year. and has actually started to move in an upward trajectory and even got into expansion territory in the last quarter of fiscal '26.

And given our 3- to 6-month lag, our revenue is doing broadly what it should be against that background. On the right-hand side of the chart, we've set out the regional PMI data, which Kate will discuss and allude to in a minute, but that is supporting the growth that we've seen in North America and in APAC throughout the year, which particularly accelerated into the second half when EMEA also returned to growth. And with that PMI improvement now extending over a couple of quarters, whilst there's still a lot of uncertainty out there, it does feel like we have a bit of a [zephyr] or maybe even a tailwind going into '27. So, as you know, our high service industrial MRO distribution markets are large. They're complex. They're multifaceted, and it's quite difficult to get independent share data. So, in order to determine how we're performing against our markets, we use lots of imperfect data sources to triangulate our relative performance. And we've highlighted a couple of those on this slide.

On the left-hand side of the chart, in our digital channel, we monitor Google traffic for relevant search terms in our product category areas. And you can see it broke down in that chart on the left by product categories. And as you can see, across all four major drivers of our revenue, we are performing significantly better than the market as defined by search frequency on Google.

And on channel shares across EMEA and Americas, where we can get data from our suppliers on the right-hand side of the slide, in looking at our relative performance to our suppliers' channel share data, we continue to gain or hold share in categories that make up over 90% of our revenue and are only losing share in categories that make up less than 7% of our revenue, all of which is indicative to us that our differentiated proposition and the strategic investments that we're making are continuing to drive share gain.

And so with that quick drop through the highlights of the year and what's been going on in our markets, let me pass you over to Kate, who will take you through the numbers and the drivers behind them.

Thank you, Simon, and good morning, everyone. I'd like to echo what Simon has said. We have made considerable progress over the 2 years as we execute our strategic plan. And although the market environment remains uncertain with recent events in the Middle East, RS Group is in a much better place today. There's plenty of evidence to support this in the numbers we've reported.

And in the second half of the year, the group showed good revenue momentum, and demonstrated strong discipline in pricing, cost and working capital and investment choices. Revenue decreased by 1% compared with last year on a reported basis. Our like-for-like decline is flat after excluding the impact of a weaker dollar, reduced trading days and 1 month of revenue from BPX, our recent acquisition.

Group revenue growth improved in the second half of the year with EMEA returning to growth and continued growth in APAC and North America. I'll go through a revenue bridge slide on the next page or so. Our gross margin improved in the second half of the year through ongoing price discipline and active inventory management. Reduced revenue volumes and increased organic investment were offset by reduced interest charges such that adjusted profit before tax reduced by low single digits.

Our reported operating profit includes two large offsetting items, which are exceptional in nature, a GBP 11 million positive settlement of a legal dispute relating to our purchase of the Synovos business and a GBP 15 million write-off of old and unused code, which had previously been capitalized. Cash flow conversion was strong at 109% with continued good working capital management and return on capital employed was stable at 15%.

The business continues to demonstrate strong cash generation characteristics. We remain committed to our progressive dividend and will increase the final dividend by 2% to 14.2p per share, taking the full year to 22.9p per share, and our balance sheet is now at the bottom of our target net debt-to-EBITDA range of 1x to 2x. Given this and consistent with our capital allocation policy, we have commenced GBP 100 million share buyback over a 12-month period.

Our M&A pipeline remains strong, and we continue to pursue inorganic opportunities, which would accelerate our strategy. Let's turn to look at revenue in a bit more detail. And as already mentioned, like-for-like revenue is flat year-on-year after excluding impacts of FX and working days. However, when I look at like-for-like daily average growth, price is up around 2% and volumes are down about 2.5%, and we see a very similar shape in EMEA and Americas. Volume trends also improved through the second half of the year. We've welcomed BPX into the business on the 1 of March. And to give you a little bit more color on revenue performance, average order value was up from 263 to 276, improving across all customer segments and outpacing price movements, whilst the number of orders was down, specifically in the smaller key and standard customers who mostly purchase infrequently and through our web channel.

Moving on to that, the digital revenue, which accounts for about 60% of our group revenues, decreased by 1% on a like-for-like basis, which is largely as a result of this web demand, which declined in softer markets and short-term H1 impact. At a product level, the more resilient categories of facilities and maintenance and mechanical and fluid power grew 2% and 8%, respectively. Automation and Control and Electrification, our largest product category, was down 2%. Demand for Semis and Passives continued to be weak with end markets remaining challenging.

RS PRO continued to outpace other categories, growing by 5% in year and increasing revenue share by almost 100 basis points to 14.4%. We continue to demonstrate discipline in our cost management whilst ensuring we have the appropriate skills and tools to deliver our strategy. Our adjusted operating cost base includes a strategic uplift in organic project investment and restructuring and integration costs. Reported operating costs were flat year-on-year and remained stable at 35% of revenue. Our ongoing run cost base, excluding one-offs, increased by 2%. We continue to build back our employee incentives and inflation increased costs by GBP 29 million. These cost increases were in part offset by GBP 17 million restructuring and integration benefits.

What is not visible in these bridges, though, is how we're absorbing the investments in key skills and the migration of software payment models to Software-as-a-Service. Our total efficiency savings over the last 3 years have now total GBP 55 million, and we have increased our organic OpEx investment in the year by GBP 4 million to the lower end of our guidance range, which was GBP 35 million to GBP 45 million. We benefited from a GBP 5 million one-off gain, largely driven by the GBP 3 million profit on the disposal of Distrelec's Nordics and Baltics business.

The cost to deliver the restructuring and integration savings in year was GBP 9 million. So, wrapping it all up in operating profit margin, the underlying operating margin, excluding the choice to increase organic investment, OpEx was flat through the year. And you can see on the chart that revenue inflation offset cost inflation very neatly. Gross margin was positive, offset against volume reductions. And so, on a net basis, reduced operating margins by 90 basis points. This was mitigated by our cost reduction program and lower restructuring and integration costs in financial year '26 versus the previous year.

So, let's focus a bit on the regions and specifically on EMEA. The key messages here to share with you. We had revenue momentum in H2 in all our markets. PMI indicators moved into expansion territory. However, these are indicators, and we tend to have a 3- to 6-month lag in our performance versus markets in industrial production recovery. The U.K. has shifted to growth. France continues to outperform and the DACH region was mostly impacted by Germany, where broader market context remained challenging.

Our strategic focus areas are outperforming the markets, notably corporate customers, services and solutions and RS PRO. NPS did take a dip in H1 and is recovering. But given it's a rolling 12-month measure, it does take a little while for this to fully reflect in the numbers. We are pleased with the integration of Distrelec into the business, which is almost complete. Our business case targeted EUR 30 million in margin and cost synergies on a euro basis. And so far, we've delivered EUR 41 million on an annualized basis with a bit more to come.

Switching to Americas. Again, a couple of key points to pull out. US&C growth accelerated through the second half. Off-line sales showed good momentum as the customer relationship management tools and targeted supplier strategy are actively deployed. Gross margins in the U.S. improved off the back of pricing and better inventory management and provisioning. I also said at the half year that we were seeing some delays in Mexico in customers committing to large capital projects and that while the order book was robust, large projects have been shifting to the right off the back of the trade arrangement that hadn't been fully agreed with the U.S., Canada and Mexico.

And we still see that impact in the second half while we wait for that resolution. But we also have a mechanistic decrease in revenue in Mexico because of the significant strengthening of the peso versus the dollar. Most of our sales in Mexico and our inventory purchases are dollar priced and they are then converted into Peso, which is the reporting country currency. And this accounted for about half of the 21% revenue decline that you see in H2. It has an equivalent offset in cost of sales. So, from a gross profit, gross margin perspective, it was flat in Mexico.

And finally, there's a positive story to tell in APAC, where our subregions are all in growth in both price and volume and showing positive sales momentum. Gross margins are holding and good cost management means we see evidence of positive drop-through in our operating profit year-on-year. So, let's move on to cash, where our continued focus delivered cash flow conversion at 109%, broadly similar to last year and well in excess of our target of over 80%. Adjusted free cash flow was down GBP 12 million, primarily reflecting lower adjusting operating profit. Our working capital was well managed with key metrics showing inventory purchasing discipline and stability in receivables and payables. We would expect cash conversion percentages to reduce in more buoyant market conditions in order to support volume growth while maintaining working capital discipline, and that will be a pleasant problem to contend with.

We slightly increased our CapEx investment in the year, notably on the build-out of our new Italy and Ireland warehouses, and our business remains well invested with the CapEx to depreciation ratio at 1.3x. Net debt decreased to GBP 329 million and is now equivalent to 1x net debt to EBITDA. So, on our capital allocation policy, this cash-generative business model, strong balance sheet and the debt facility headroom does provide us with plenty of capacity for continued organic investment and selective M&A as well as returning capital back to shareholders in the form of both dividends and share buybacks as we've announced today. There is no change to our previously communicated capital allocation policy.

Finally, for me, just to give a little bit of help, a few guidance points with next year's modeling. So, we are not signaling a change in gross margins from full year '25 to '26, albeit there may be some movement between gross margin and variable costs depending on what happens with freight movements in the year. Specifically on operating costs, you'll recall on Slide 11, I took you through our ongoing cost base in full year '26 to GBP 981 million. That excludes our one-off benefits and in-year restructuring and integration costs. So, with that as your starting point, things to take into account for '27. The cost inflation is likely to continue at around 3%. Variable costs, don't forget those for those who are modeling volume increases in revenue are about 6% of revenues.

Our organic OpEx investment is likely to increase towards the top of the stated range of GBP 35 million to GBP 45 million as we increase our spend on process harmonization and technology, and we expect to continue at that rate for a few years. The continued rebalancing of employee incentives, including the change to the RSU and our choice to make our people, shareholders in the business will increase employee incentives by around GBP 5 million to GBP 10 million.

Net integration and cost efficiencies are around GBP 10 million, and we are also making additional cost savings to absorb the investments required in capability, for example, data analytics, security, pricing as well as the continued transition to the Software-as-a-Service pricing model that many of our technology partners deploy. We will ultimately reduce our technology CapEx spend. We expect around GBP 10 million to GBP 15 million in integration and restructuring costs to enable some of these efficiencies and CapEx to remain at around GBP 50 million.

I'll now hand you back to Simon.

Thanks, Kate. So, as touched on at the beginning of the presentation, here's the infamous RS wheel. This is where we have started a program in 2024 to enhance and accelerate our sustainable growth to improve the efficiency of our business and to deliver much better operating leverage from RS over time and particularly as end markets move into recovery. We're investing in 5 areas: Customers, Customer experience, Products and suppliers, Solutions and Operational excellence, which is all underpinned by improving capability and our great people.

In the next few slides, I'm going to take you through a bit more of the detail of what we've invested in so far, where I see we beginning to realize some benefits from that investment and where we're going to continue to invest in '27. And the pie chart on the left-hand side of the page sets out the investments and where we made them in 2026. The dark red coloring represents the strategic OpEx investment. The light red is strategic CapEx and the purple is investment in our physical infrastructure.

And as you can see, a good chunk of that investment was foundational and focused on front-end systems, data and processes to enhance our customer capture, to improve our share of wallet and to drive better experience for them, and I will talk more about that in the next couple of slides. As we move into '27, whilst we'll be activating a lot of these investments, the major additional investment we'll be doing is more around operational excellence as we position ourselves well for enhanced drop-through of future growth in the years to come.

Now let's go through each of these areas in a bit more detail. I'm particularly encouraged by the progress we've made in unifying our customer data and platforms to allow us to better target high potential value customers and drive share of wallet growth with them through more personalized experiences and at an optimized cost to serve. Last year, we finished and completed our global customer data platform and rolled out a common CRM across our digital and EMEA high-touch channels, giving us a unified behavior-led view of customers and of their potential.

And as we deploy these insights, early results are encouraging with improving conversion rates, stronger sales conversion, pipeline conversion and a 6% like-for-like revenue increase across our high-touch corporate customers. We'll continue to build on this momentum through '26, '27 as we optimize and increase the automation of data flows across our customer-facing platforms and channels. And we'll also start integrating all our data and tools with our CRM, which will allow us to drive an increasingly automated and efficient deployment of our sales and marketing resources to target those high potential value customers with a more personalized and efficient sales, service and support engagement. And all of this is targeted at allowing us to continue to grow market share and to capture more of our customers' wallet.

The design and development and upgrade of our digitally enabled omnichannel customer experience is now largely complete and most of the foundational investments to enable it to have been made. This year, we completed the rollout of our AI-enabled web search and began integrating it with our existing digital commerce platform. And we've seen significant increases, as Kate alluded to, in our add-to-cart rate and a meaningful increase in our basket to order conversion. We also completed the development of and launched an upgraded digital commerce platform based on Adobe in America in the first half of the year, which is now beginning to deliver improved functionality, greater personalization and much richer data capture, particularly as we tune it with our global digital data and experience capability.

We're continuing to enhance this digital commerce platform, which will ultimately replace the existing platform we have across the group, and it's already in testing phase in EMEA. We also finished the rollout across EMEA and APAC of the final phase of our delivery to promise solution, which, after the expected decline in NPS on preliminary implementation, which you heard about from Kate, has led to significant improvements in H2 and also drove a 4% uplift in average order value. And combined with stronger search and a new basket and checkout experience, we're seeing meaningful gains in findability and conversion. And our focus in 27' is to start the phased rollout of our upgraded digital engine in Europe while scaling and tuning our experiences to support enhanced retention and again, greater wallet capture.

Our product management solution moved into activation phase this year and is significantly accelerating the pace at which we can bring new products to market. We can now list in excess of 50,000 new products a month and now have also a nonstocked capability, which we've launched with more than 185,000 products available for customer-only orders. In addition to listing more complete line cards for suppliers, this also allows us and provides data for us to test demand and make better informed new product inventory decisions.

Our enhanced product management capability extends to our own label business, RS PRO, where we launched an additional 10,000 new products, more than 45% -- up more than 45% this year. And it's part of the reason that part of the reason that RS PRO delivered a record year, and we continue to see good opportunity for further Pro growth over time. We're continuing to invest in pricing tools and capability, particularly in North America, which has strengthened our ability to navigate trade uncertainty and inflation effectively. And by combining strong capability and execution with AI-enabled pricing tools, we were able to deliver 3x more targeted price actions than we did in the prior year, which improves our alignment to both our cost and market dynamics and supports both our customers and suppliers. And as we go into '27, we'll continue to tune our product management system to further optimize global stocking decisions and build on our American-based database margin optimization capability, automating it and integrating it before rolling it out across the rest of the group over the next couple of years. All of which will improve inventory management and greater pricing agility.

We continue to enhance and scale our solutions offer, which is delivering 6% like-for-like growth this year and now represents over 25% of group revenue. Digital procurement remains a key driver with e-procurement growing 9% like-for-like, and this allows us also to build much deeper and stickier relationships with our higher potential value customers. Our RS Integrated Supply business delivered a strong year as we further improved our in-house tech platform, RS SYNC, which is with AI-enabled product identification and an expanded curated marketplace for our customers. And this supports those large customers with multisite facilities that are seeking to optimize their total indirect procurement, costs by outsourcing processes and acquisitions and drives total MRO cost efficiency.

In '27, we'll be upgrading and launching enhanced purchasing manager solutions that enables SMEs to have greater control and oversight over their indirect procurement across the site as well as continuing to enhance and build our e-proc system into our broader technical base -- technology base. And we'll also finish the rollout of our improved integrated supply solution to all of our integrated supply customers, which drives those deeper relationships that are important for share gain. There's a lot going on at RS. And we should not forget we continue to invest and optimize our physical distribution network as well as our process and technology estate.

In '26, as you've heard from Kate, we completed the exit from our Distrelec warehouse in the Netherlands and made significant progress in the build of upgraded facilities in Italy and Ireland. And this will include the installation of a state-of-the-art robotic automation system in Italy, which will become the standard for all of our regional distribution centers going forward. We're continuing to simplify our technology estate. To date, we've taken out more than 100 applications, and we see further opportunities for consolidation and harmonization as we continue to drive process and operational excellence. And this will allow our business to absorb the increased licensing costs that we see as a shift of a -- as a result of our shift from an organic development model to a Software-as-a-Service technology approach.

We optimized our flow through our distribution network. We've removed non-value-added touch, and we've reduced the number of times we handle a product, which has resulted in a 50% increase in our supply chain efficiency ratio and a much-improved cost to serve. And as we enter '27, we'll commence operations in Italy and complete Ireland and our U.K. warehouse management systems upgrade. And importantly, we'll start to prepare in earnest for the upgrade of our enterprise resource planning system, scrubbing the data, completing the process design and mapping current and future state with the first country market rollout anticipated in calendar '28. All of which allows us to access the next phase of process harmonization, automation and that improved operating leverage that we referred to.

Value creative M&A remains an important addition to our organic growth strategy in the year, as you've heard from Kate, we broadly completed the integration of Distrelec. Trident is going well, and we also acquired BPX. As we enter '27, we've got a decent pipeline of further opportunity. But as you've heard from Kate, after 2 years of positive underlying progress, a clear plan and an understanding of what we will be investing organically and what that will deliver, we have more than sufficient financing capacity to execute our organic investment program and continue with these bolt-ons. So, in line with our disciplined approach to capital structure and allocation, we've announced this GBP 100 million buyback this morning.

So, with that quick drop through of what's going on here, I hope we've given you a feel for why we're pleased with both performance and strategic progress. And as we go into FY '27, whilst there is still a lot of uncertainty out there, we've demonstrated resilience. We are seeing stable to improving sentiment, sequential increase in growth and most of our major markets are performing as they should. We've got a differentiated proposition that's allowing us to continue to gain share across most categories. There is a lot going on here, but the significant strategic investments that we've made to accelerate growth, improve efficiency and drive better operating leverage are all on track. And more importantly, they are beginning to deliver, and I'm comfortable that the level and pace of change at RS and our people's capacity to execute our value acceleration plan is all in hand and proceeding as anticipated.

We continue to deploy capital in a disciplined way through organic investments, M&A, dividend and where it's surplus, returning capital to shareholders. So, whilst being alert to volatile macro and geopolitical conditions, we are keeping focused on the things that we can control. on activating those investments that we've already made on continuing to drive operating leverage through global collaboration, cooperation and process harmonization and maintaining capital discipline whilst pursuing value-accretive external opportunities. And all of this gives me and the Board increasing confidence that our medium-term financial targets, growing revenues at twice the market, achieving mid-teens operating margins, strong cash conversion and returns on invested capital aren't just credible, they're achievable and will deliver sustainable value for all stakeholders over time.

So, thank you for listening. We'll now be happy to take any questions. If you could raise your hands, state the name and the institution that you represent and then ask your questions, we will answer them as best we can. We also have people online, and they can make -- they will submit their questions online and somebody will ask them for us.

It's Tom Callan from Investec. I've got 3, please. Firstly, just on average order values, strong year-on-year ahead of inflation at the group level. Just so I'm clear, was this growth mainly price or volume led and was there any disparity between the regions? On Services & Solutions, continue to outperform. How important is the continued scaling of e-procurement and integrated supply to sort of achieving your medium-term margin ambitions? And then just on the pipeline that you alluded to, Simon, in terms of M&A, are there any obvious strategic or operational gaps that you're looking to fill here?

Thanks, Tom. Average order value is up mainly price, a little bit of volume depending on where you are, a little bit of more lines per order, but generally, it's price and a little bit volume. No real difference, I think, across any of the regions, Kate?

I would say average order value is outpacing price, but we are seeing a number of orders going down, so supportive of what Simon said. But the -- across all regions, it's all very similar. So, the degree of improvement is the same EMEA, Americas, APAC. So, if you take 263 to 276 and apply that kind of differential across each region, it's very similar.

I think if you look at it rather than on a regional basis, if you look at the touch versus non-touch customers, the growth is in -- the growth in both volume and price is in the touch customers. The average order value is a bit lower in standard transactional come to the web type customers.

On how important is services and integrated supply to margin development, it's a piece of it. But our ability to achieve mid-teens operating margins is not dependent on RS IS or our services business, it's actually dependent a little bit on volume. And then in terms of M&A pipeline, we've got a good M&A pipeline, and I think we continue to monitor all sorts of opportunities out there. And if we think that there's a reasonable chance of us on a risk-adjusted basis, creating value from them, we've got plenty of capacity to do that, but there's nothing immediately that I'm sitting here thinking we must do this, and we should tell you about it before we do it.

It's David Brockton from Deutsche Numis. Can I ask two as well, please? Firstly, it's great to see improving momentum coming back into the business. Can you give any insight into how that trended through Q3 and Q4? And if you can't do that, can you give a view as to what the exit rate was just to help understand the magnitude of that momentum. And I appreciate you're lapping a weak comp as you enter the year?

And then the second question relates to electronics and specifically Semis and Passives. I appreciate you've acknowledged that you're losing share in that category. But we are in the midst of one of the strongest sorts of semi-cycles for quite some time. And I want to know if you're seeing that strength come through in the business and why you think you're losing share there and what plans you have to turn it around?

Thanks, David. Do you want to do Q3, Q4 exit rates and I'll do electronics.

Yes. So, I mean, we did see improvement Q3 to Q4. So, group Q3 was 0.6% negative. Q4 was 0.3% negative. Good progression in EMEA, which went from negative to positive Q3 to Q4, continued growth in APAC really, the change was Americas, and that's largely to do with Mexico and quite specifically as well around that dollar-denominated dynamic as well that is probably worth adjusting for.

So, I sort of referred to [zephyr] rather than tailwinds. I mean it's feeling better. But we're conscious that there's a macro world out there. So, we're definitely feeling better -- on electronics, I think as we've spoken to you in the past, there was a period where we went into probably greater depth in electronics than our customer set was -- traditional customer set was really interested in, and that's been unwinding over the last couple of years.

Electronics is a super important category for us, but it's for our MRO users, not for production level buyers of electronics. I think your reference about Semis and Passives is absolutely true. There is good driving demand going on at the moment in Semis and Passives, but it's mainly in Semis, it's not Passives, and it's mainly driven by data and AI. And for our MRO customers, that's not a big demand need right now. So, whilst we do carry a lot of NVIDIA, Arduino type product, we're selling it into R&D labs and things like that, where the demand level is relatively low. So, we would expect as the Semis particularly Semi side of electronics continues to move into a slight supply-constrained environment. We will see that growth, but we will underperform those people that are supplying into mainstream production because of our target on those MRO customers.

Andrew Nussey from Peel Hunt. Again, another couple of questions. First of all, on RS PRO, how many more products do you think you can put on to the platform? And then do you have any sort of updated thoughts on what regional penetration might be over the medium term? And once you've tried RS PRO, do you tend to stick with it, is the first area of questions.

And then secondly, you mentioned there's a lot going on at RS, particularly in terms of moving into the back end. If we subscribe to the view where we start to see volume and mix improve, just your confidence that you can continue to meet your customer expectations as that ramps up?

Thanks, Andrew. Both really good questions, all really good questions, just to be clear. On RS PRO, look, I think RS PRO is always a balance between ensuring that we're carrying the right products for our strategic suppliers and then supporting that strategic supplier content with some of our own label business. So, we're not limited by the pace at which we can take on new RS PRO products other than we've got to source them. It's more about making sure we're balancing those strategic suppliers and those strategic products with our own RS PRO offering.

Once you bought Pro, you tend to stick with it for a certain range of products. And so it does create some customer stickiness -- but we're far from complete on our RS PRO journey. And RS PRO by proportion of sales is largest in Europe, and we see good building growth in Asia Pacific and strong growth in America, but off an extremely low base. And as you know, we've now got a slightly different approach to Pro America, which is to think about what our customers want, what our key strategic suppliers are and what RS PRO products better suit that American customer. So, there's a long way to go for Pro. There's still more to do in Europe, a lot more to do in Asia and a huge amount more to do in America, but it will take time.

The share in RS PRO grew in all regions.

Yes. And then, yes, there is a lot going on, Andrew, across RS, but I'm comfortable with the capacity of the organization to deal with it. Hopefully, it won't -- you won't have missed the fact that a lot of the stuff we've been focusing in this down cycle is improving the front end of our business. So, being able to target the right customers with a better service and a better delivery. And I'm comfortable that those investments are going to pay off as we continue to support the customer into what feels like a bit of a recovery. And the organization is finally beginning to be able to breathe a bit, which is good and maintain that customer focus. Yes, I think we're in a good place.

James Rose from Barclays. I'll go for three, please, if I can. Firstly, on Mexico, given the visibility you may have there and sort of where the peso is currently, do you still expect that to be a material drag over the first half of '27?

Secondly, the gross margin increases throughout the year, could you sort of unpick and explain what's driving that particularly? And then thirdly, the guide for sort of core inflation, OpEx inflation is about 3%. I think that's pretty similar to what we had in the prior year. Is there any sign that that's starting to tick up already within the business if we just think across fuel, freight and energy and what are the potential sort of offsets you've got if that happens?

Thanks, James. I'll let Kate deal with her favorite subject of Mexico and the peso and gross margins. And I will -- let me just touch on OpEx inflation. So, we're guiding to 3%. We are seeing more than that in some cost areas, freight, fuel, things like that. But we are -- we do see and have the ability to pass that on in terms of pricing. So, it's a good working assumption as this -- the impact of this macro Middle East thing plays through, it will become much clearer which elements of our cost base move in what way. What we have shown is our ability to pass that on in terms of pricing. That helps a little bit with that gross margin discussion with that OpEx guidance discussion.

So, on Mexico, so let's just separate two things that are going on in Mexico. So, if we focus on the mechanistic dynamic around the revenue and the COGS base. So, dollar denominated in peso, the dollar significantly weakened versus the peso, particularly in the second half. So, that mechanistic calculation of revenue in dollars into peso and then into pound was a small upside in H2 and then quite a big downside in H1 and a big downside in H2. Using spot rates going forward, then I'd expect that, that will be similar, but who knows. Last year, it was up and then down. So, let's see how it is. But if I look at spot rates, then yes, that will continue to be a drag. If we then look at the underlying what's going on, which is really around those capital projects, we really kind of saw the delays of that kick in and around Q2 of last year.

So, I think comparators-wise, Q1 probably will still be a little bit tricky, and then we'll get into sort of a better comparator set from Q2 onwards. And then cross fingers that the trade agreement gets resolved, the order book that we have really converts at the pace that it used to, and we'll see that coming through. But it kind of depends on what happens with that trade agreement.

I think the important thing in Mexico, James, is though that these projects aren't going away, then moving to the right. So, without losing them. It's just the capital investment decision is being deferred until the trade arrangements with North America, I think, are finally in place. And frankly, there is some underlying issues in Mexican stability that need to be resolved as well.

And then just looking at gross margin. So, probably -- I mean, not much to say about APAC, but if I just differentiate a little bit in EMEA and Americas. So, good underlying gross margin improvement in EMEA, net of discount. So, feeling pretty comfortable around that. From an Americas perspective, there was some inventory management in particular, that gave us a bit of a bump in H2 favorable that I don't expect to continue into next year, which is why net-net, I guide to a sort of a flat position from '25, '26 into '27.

It's William Blunt with Rothschild & Co. My first question is just on the 6% growth that you saw from the corporate customers. That marks quite an acceleration, I think, in the second half versus the first half of the year. Was there any regional disparity between that recovery? And then maybe do you think you could give a split or some color around the split between how much of that was increasing share from existing accounts versus winning new corporate accounts?

And then my second question is just on managing operating costs going forward. I think previously, you talked to I think some natural attrition, lower your headcount rates across the group. Is that still the strategy going forward? Now you're seeing maybe a bit more momentum improving.

Thanks, William. That 6% corporate growth is a bit of an acceleration. It's a mix of new customers and increased share, and it's mainly in Europe and a little bit in Asia Pacific. In North America, we don't have as many of those large corporate customers today. It's a more automation and control and SME-focused business, although over time, I'm sure that will evolve. Do you want to do op costs?

Yes. So, I mean on op costs, I mean, we seek to do this as efficiently as we possibly can. And the change in cost is both third-party and labor costs. And as you see, we've been spending a bit of money on both integration and restructuring charges throughout the year. And we'll continue to do that where we think it's the right thing to do.

Part of that, William, as well is about kind of changing sometimes our emphasis on skill sets. So, reducing some things that we don't think we need as much of and increasing some skills that we think we need more of. So, there's a bit of redistribution there. I think on natural attrition, I think like many companies, we're seeing our voluntary attrition, if anything, go down. So, perhaps not giving us as much of ability of fix as we had before. And so that, again, is a driver behind us being alert to the potential need to do more on the restructuring base.

But I think, William, that it's important that we understand that we're always actively managing our cost base to reflect on the environment we see without damaging the business going into a potential recovery and up cycle. So, we're playing that balance all the time. I think it is fair to say we're also investing not just in hiring external capability but upskilling our own people.

So, quite a lot of investment last year was in supporting our leaders and our people in upskilling them because the world we're entering is quite a different world from the one that they've historically dealt with. And a lot of that process optimization and harmonization that we're talking about will have a big automation piece in it. So, there will be an active management of the cost base going forward, but also an upskilling of our capability and our people.

Any online? What's the online question? On the phone, we have a question.

We have a question from Zach Alcuti.

Just two questions, please. Firstly, on Germany, you noted that it remained more challenging there. Just are you seeing more recently any green shoots there that you would call out or any more generally optimism in the market given the stimulus? And then secondly, just on the cash conversion, that was one of the standout metrics today. Could you unpack that performance a little bit? And maybe were there any one-offs we should be aware of there?

Great. Thanks. I'll take the German question, and then Kate will talk to cash. Germany continues to be challenging, although after 2 years of a challenging environment in Germany, the lapping comparators are definitely getting easier. Look, I think there is some signs of sentiment improvement in Germany, but the automotive industry, which supports a lot of German industry and indeed Italian industry remains quite challenged. I think we have started to see the odd green day, week or month in Germany. But again, that's as much from weaker lapping comparators as it is from a fundamental recovery in German industrial production. And I think we will lag a little bit of that industrial stimulus because a lot of it will go into aerospace and defense, and it will go into new production rather than maintenance, repair and overhaul, which is what we support. But we are softly optimistic that Germany will not be as bad this year as it was last year. Whether it shifts into growth or not, we'll see during the course of the year, but we're pretty confident that we continue to outperform in Germany, notwithstanding it's a difficult market for most people. The interesting thing is we are seeing some recovery in Italy and a lot of the smaller industrial manufacturers in Italy are supplying into broader German industry. So, if that's a bit of a lead indicator, there may be a bit of hope there, too, if that helps.

Cash conversion?

Yes. I mean I think from a cash conversion, I mean, no significant funnies there. I mean, I think we had a large amount of cash come in from that legal dispute, but we adjust for that out. So, cash conversion doesn't include that. The real dynamic around that is what you'd expect to see in an environment where volumes are coming down a bit as you would expect really tight inventory control and that inventory converting into cash whilst you maintain your metrics. So, your turns, your days payables outstanding, your days sales outstanding. So, I think what you see in the numbers is good discipline around the metrics and the release of inventory sold into the market. And that's what's driving the cash conversion to be north of 100%. As I said, in an environment where we have more buoyant markets or volume growth, then it is very likely that we would increase our investment in inventory and whilst holding our metrics, there'd be more of a working capital investment, which may drop that cash conversion below 100%. And that would be a very lovely problem to be actively managing.

And I think the key that people should also take away here is that active management of the business now extends not just to revenue to gross margin to operating cost and to operating margin, it also extends to cash flow. So, there is an increased and regular drumbeat that Kate and the team have introduced, which is driving a much greater focus on cash in a positive way. And I do think you're seeing the benefits of that in the cash conversion again that you saw this year.

So, that looks like it from questions on the phone or online or in the room. Thanks very much for attending and have an enjoyable day.

Thanks very much, and good morning, everyone. Welcome to the RS Group Interim Results Call for the 6-month period ending 30th September 2025, and thank you all for joining us this morning.

The presentation should take around 30 minutes, and then we'll have some time at the end for questions. But we'll try and make sure that we finish the call by no later than 10:00.

I'm going to start by summarizing our pleasing first half performance. Kate will then run through our in-line financials and what's driving them, both at a group and a regional level. Then I'll conclude by sharing with you the good underlying progress that we're making as we make the business better at RS and position ourselves to accelerate growth, improve efficiency, and drive better operating leverage over time.

But before we get into the details of this morning's presentation, we'd like to start our meetings, virtual or physical, at RS with a health and safety moment and a values highlight. So although we're virtual, please make sure you do take a safety moment to identify your nearest exit and safest evacuation route in the event of an emergency.

For our values highlight, I would just like to call out and celebrate our new multi-year global partnership with SolarAid to support their mission to light up lives across rural Africa. As our new global charity partner, their and our purposes and values are completely aligned that is one team delivering brilliantly, doing the right thing and making every day better. We'll bring our people, our innovation, our technical expertise and our suppliers and partners together to help raise over GBP 1 million to partner with SolarAid to deliver clean, safe solar light and power to over 150,000 people living in rural communities without electricity. This is very much RS demonstrating our values in action and continuing to make amazing happen for a better world.

So as you know, we're on a journey to create a better business here at RS, and I am really pleased with the progress that we have made in the first half. Against the background of a challenging geopolitical environment and uncertain markets, our data tells us that we're continuing to outperform. We're delivering financial outcomes that are in line with expectations. We're actively managing our business to reflect the trading environment we find ourselves in, but we're continuing to invest in the strategic and operational initiatives that are already beginning to deliver, which underpins our continued confidence in returning RS Group to growth and through focused investment and effective execution delivering on those medium-term financial targets and much improved value creation that we first talked about at our Capital Markets Day last September.

So before Kate takes you through the financials, I think it's worth looking at what's going on in our markets, which remain uncertain, although I have to say a bit more stable. As we shared with you at our Capital Markets Day, high service industrial and MRO distribution markets are large, complex and multifaceted, and they are also generally fragmented as are the competitors who play in them.

And it's for this reason that we have highlighted that the best way of thinking about our future direction of travel is to look at PMI data, and that our revenue growth is very closely correlated with trends in PMI data, typically lagged by between 3 and 6 months. And during the first half of the year, this remained true. As you can see from the chart on the left and in the red circle, PMI data, which is the gray bars, have been improving since the low point in our fiscal Q3 last year, but it still does remain below 50, suggesting modest contraction. And markets in the first half were probably a bit slower than we anticipated.

But against this backdrop, our revenue, shown by the red line, has stabilized and indeed started to move in the right direction over the last couple of quarters, and we actually returned to marginal growth in Q2. As the chart of the regional PMI data on the right indicates, and as you'll hear from Kate in a minute, this was reflected in good growth in Americas and APAC, broadly offsetting a small decline in EMEA.

Now whilst PMI data is a good indicator of the likely future direction of travel, we use other data sources to assess our relative performance, and probably the most relevant of these are web searches and supplier reported channel shares. We monitor Google traffic for relevant search terms, and these were down 6% in the first half versus our own group and indeed digital performance, which was only down 2%.

And in the chart on the left, you can see that we've broken it down by product category across EMEA, where we have the most detailed data. And in all 4 of our major product categories, you can see that we are performing significantly better than the market.

And on the right-hand side of the chart, on channel shares, supplier data continues to indicate that we're gaining share from other distributors across virtually all of our industrial product categories in Europe, and if anything, this has probably picked up a bit in the first half of this year, which is all indicative of our continued outperformance, which is enabled by our differentiated proposition.

So with that market background, let me pass you over to Kate, who will take you through the numbers and the drivers behind them.

Thank you, Simon, and good morning, everyone. I'd like to echo what Simon has said, we've made considerable progress over the last couple of years. And although the market environment remains uncertain, RS Group is in a much better place today. There is plenty of evidence to support this in the first half. In Q2, we moved into growth for the group. We are actively demonstrating strong cost management, managing pricing and cash flow, alongside discipline in investment.

Revenue decreased by 3% compared to last year on a reported basis. On a like-for-like, the decline is 1% after excluding impact of the weaker dollar and reduced trading days. EMEA performed relatively well in a weak industrial environment, and performance in the Americas and Asia Pacific was positive, and I will go through the revenue bridge on the next slide.

Lower revenue and increased investment drove single-digit reductions in our adjusted profit and earnings measures, despite the benefit of a slightly higher gross margin. And cash flow conversion was very strong at 107%, with continued good working capital management and ROCE stable at 15%. In our unadjusted free cash flow, we also saw a GBP 10 million cash contribution following a successful legal challenge.

We are increasing the interim dividend by 2% to 8.7p per share, in line with our progressive dividend policy and our expectation of low single-digit growth until cover grows back to historical levels. There are a few things to highlight on the progress we're making in our growth accelerators at the bottom right corner of this page. As Simon has illustrated, in current market conditions, the digital revenue decrease of 2% is indeed a resilient performance, supported by the investment in web conversion and a 9% growth in our e-procurement solution for higher value customers.

This largely offset reduced revenue from typically lower value web-only customers, including the temporary impact of our U.S. digital platform upgrade. This growth in e-procurement was also reflected in a 7% increase in like-for-like service solutions revenue, alongside improved revenue and profit from RS Integrated Supply, following the strategic refocusing of that business under new leadership last year.

And RS PRO grew sales by 4% with growth in all of our regions. We continue to develop our product offering and improve the marketing of our range, and RS PRO now accounts for 14% of Group revenues.

So let us turn to look at revenue in a bit more detail. As I said, like-for-like revenue fell 1% compared with last year after excluding the impact of FX and working days, and in this chart, we also show the temporary impact on revenue of the U.S. digital platform upgrade. Most of that impact was in the first quarter, with steady recovery through Q2. And adding this back, like-for-like revenue would have been flat in the first half.

We also saw a reduced average order frequency and a lower number of customers as demand fell in markets that were in contraction through the period, including some expected customer attrition in Distrelec as customers migrated to the RS proposition. However, this was offset by the benefit of active pricing management, including supplier pricing pass-through, and importantly, the increased revenue from our higher value corporate and managed key customer accounts.

These factors resulted in a 3% increase in the average order value in the first half. At a product level, the more resilient categories of facilities and maintenance, mechanical and fluid power, PPE and site safety grew 3%. Automation and control and electrification was down 2%, but do show signs of recovery. Demand for semiconductors continues to be weak, with end markets remaining challenging.

Turning to costs and cost management in the half year has been good, and I am really pleased with the discipline evidenced across the group. We have held costs flat half-on-half despite inflation and increased organic OpEx investment and the net impacts of inflation, a favorable FX impact on the weaker dollar, and a GBP 5 million increase in organic OpEx investment was largely offset by restructuring and integration benefits, including those in Distrelec, which was an additional GBP 9 million in the first half.

We are on track to comfortably achieve our target of over GBP 15 million of benefits for the full year. Within our ongoing cost base, our efficiency and savings, which have also enabled us to absorb investments in people, capability and the migration of technology spend to the Software-as-a-Service model for solutions partners. This results in an ongoing cost base of GBP 482 million for the half, effectively flat on last year.

Minor benefits relates to a GBP 3 million profit on the disposal of part of the Distrelec Nordic business to our existing export partners, and the cost to deliver the restructuring and integration savings in the half was GBP 4 million.

Underlying operating margin, excluding the elevated organic investment OpEx, was flat through the effective management of pricing and costs. The net impact of lowering revenue and cost inflation reduced margin by 100 basis points. However, this was offset by restructuring and integration benefits alongside a reduced cost to deliver these. In addition, we have been delivering an increasing OpEx investment spend through the transition period, with the year-on-year increase reducing margin by 40 basis points, shown to the right of the chart. These investments will drive improved margins over time from our strengthened differentiated proposition and improved operating leverage.

So moving on to the regions now and starting with EMEA, which delivered a resilient revenue and operating profit performance in weak economic conditions. PMIs were below 50 in our main markets for the period, indicating market contraction, and like-for-like revenue was down 2%, which includes the anticipated Distrelec customer attrition post the closure of the Distrelec DC, which in and of itself saved us over EUR 10 million per year.

Now let's drill down by markets. Business confidence remained weak in the U.K., but we relatively outperformed. Our performance in France continued to be strong, and our targeted products and sales offering to more resilient industry verticals were successful, for example, those connected to process manufacturing such as food and beverage. The DACH market remains challenging, with volumes remaining weak in the manufacturing and automotive industry.

Gross margin was slightly up with early benefits of pricing coming through. Operating costs increased by less than inflation through active cost management and strong synergy delivery. Largely reflected the reduction in revenue on a like-for-like operating profit was down 11% to GBP 86 million, and most of the increased organic OpEx investment resides in EMEA, which was the main factor in the operating margin decline to 10%.

Moving to Americas, which on a like-for-like basis, grew by 1%. On a reported dollar basis, it was down 5%, which is largely a function of a weaker U.S. dollar. You can see the recovery in digital sales since May, which were impacted following the upgrade of our digital platform in Q1. And if we adjust Americas' like-for-like revenue for the temporary impact, H1 revenue would have been up around 5%.

Growth rates accelerated through Q2 in the U.S. and Canada against a backdrop of resilient economic sentiment. Markets in Mexico remain more volatile, with persistent concerns over tariffs and their impact on the wider Mexican economy, and this has led to a number of larger customers deferring capital expenditure which was the significant factor in a decrease in like-for-like revenue in Mexico.

Gross margin for the region was slightly up, with a strong performance in the U.S. against the tariff backdrop, more than offsetting increased cost of sales in Mexico due to unfavorable dollar to peso movement. Inflation and strategic investment in digital and pricing optimization were reflected in operating costs.

And like-for-like operating profit was down 9%. Profit was down in Mexico, which reflected reduced revenue and gross margin. However, profit was slightly up in U.S. and Canada from improved revenue and gross margin.

Let's move on to Asia Pacific. We have been seeing positive momentum here since the final quarter of last year, and revenue was up 4% on a like-for-like basis. We delivered growth in Australia and New Zealand, with last year's Trident acquisition performing ahead of expectations. We also delivered growth in Southeast Asia and Japan and Korea. Greater China was impacted by very weak performance in Hong Kong, reflecting significantly lower spend from a few large state-owned customers linked to government budgetary constraints. Gross margin benefited from favorable pricing and lower inventory provisions. And with costs broadly stable, we saw a strong increase in operating profit, reflecting improved operational leverage.

All right. Let's move on to cash. This is where our continued focus has delivered strong cash conversion. Our adjusted free cash flow was broadly flat, with our working capital metrics stable. This resulted in cash flow conversion of 107%, well in excess of our target of over 80%, and this was largely a function of disciplined inventory management in response to revenue demand.

Stable CapEx of GBP 25 million translated to 1.1x depreciation as we continue to invest in our physical and system infrastructure. And our well-funded pension obligations mean we don't anticipate any further additional company contributions for these schemes. Net debt decreased to GBP 333 million, continuing a downward trend over the last 12 months, and is now equivalent to 1x net-debt-to-EBITDA at the low end of our 1 to 2x range.

Our cash-generative business model, strong balance sheet, and debt facility headroom provide us with plenty of capacity for continued investment and selective M&A. And there is no change to our capital allocation policy. Firstly, we prioritize organic investments in order to significantly improve our efficiency and our market position. Secondly, financially disciplined acquisitions in this global fragmented market can accelerate our strategy, especially small bolt-ons. And third, we believe in sharing cash generated with our shareholders through a progressive dividend policy. And if we cannot productively invest excess capital over a reasonable period of time, we will seek to return this to shareholders.

Finally, from me, our full year outlook, which is pretty consistent with what we indicated at the start of the year. There are a few points of emphasis for the second half. We now expect our gross margin to be a bit above 43%, so higher than last year. Our organic investment to deliver our strategic initiatives in OpEx is still likely to be at the lower half of the guided range of GBP 35 million to GBP 45 million per annum. And depreciation and employee incentives are expected to be weighted to the second half. We have demonstrated our active cost management in relation to the market environment, and we will continue to do so. There are further guidance points, including trading days and ForEx, and a summary of our restructuring benefits to-date, which are included in Slide 29 of the presentation.

I will now hand you back to Simon.

Thanks, Kate. And I think you can tell, there is a huge amount going on at RS. But I do recognize that in challenging markets, it is difficult to see this in our financial performance. So over the next few slides, I am going to highlight a number of the areas where I see the changes and the strategic improvement investments that we are making already beginning to deliver.

Because it's this that I'm pleased about and it's real evidence of the progress we're making in repositioning RS to drive better growth, improve efficiency, deliver better operating leverage, and much improved sustainable shareholder value over time. So just a quick reminder that we set out our ambitious strategy to improve RS at our Capital MarketS Day just over a year ago, and we continue to execute to that multi-year plan. Our aim is to deliver sustainable outcomes and to be first choice for all of our stakeholders, particularly our customers and suppliers. And we have detailed actions in each of the areas of our strategic wheel set out on this slide.

Whilst it's still relatively early in our change journey, in the First half, we executed effectively, and we've set that out in a fair bit of detail in the RNS. But what I'd like to do here is just highlight a few areas where we're making real tangible progress, delivering increased resilience today, improving some of our key underlying operational metrics and supporting accelerated growth that are all early indicators of us beginning to realize some of the exciting RS opportunity.

Core to delivering our strategy is, of course, our people, and we have significantly strengthened our leadership over the past 2 years and we continue to do so, while investing in training and upskilling across the group. Our people buy into this strategic journey that we are on with our engagement score well into the mid-70s, despite the challenging markets and the level of change going on within the group today.

Our people are doing a fantastic job, and they remain the lifeblood of this business as they embrace and drive change to create greater agility and efficiency. But it's probably in customers where our biggest opportunity lies and where I'm most excited about the progress that we've made over the last 6 months. There is huge potential here through the more effective use of our unique data to target the right type of high potential value customers and to increase our share of wallet with them through delivering a tailored value proposition and a personalized experience, but with an optimized cost to serve.

This requires consistent and ultimately connected customer data engagement and management platforms coordinated across the channels globally. We've now reconfigured, cleansed and uploaded and matched over 90% of our customer data across EMEA and APAC, with Americas to follow. And we are already starting to use this data to develop highly targeted and potential-based segmentation models, which will allow us to prioritize customer targeting with both human and digital marketing and to more effectively deploy our sales efforts next year, particularly in EMEA.

We've also completed in the first half the development of our customer data platform, which we're now using to develop opportunity-based personalized experiences, both online and offline, to better attract, nurture and gain a larger share of customers' wallet. Our CRM system, which we completed the rollout of last year, has now recorded over 340,000 customer interactions. And to date, this has enabled our sales team to identify more than 50,000 new sales opportunities. And levering this richer data insight, we've seen materially higher win rates and bigger deal sizes, which is part of how we've achieved that 4% growth in revenue from our corporate customer segment in half 1 that Kate referred to earlier.

This is all before we ultimately knit it all together and connect it to our enhanced digital commerce engine as we roll that out across the Group, all of which will accelerate customer and wallet capture through enhanced connected data platforms. I'm also pleased with the progress we're making to further strengthen our technical product offer. Our product management solution launched at the end of last year now has allowed us to more than triple our average new product introductions to over 30,000 a month in the first half of this year, and that's resulted in a nearly 30% increase in new product sales and great expansion of our curated product range.

And initial Investment in more dynamic pricing has allowed us to process over 3x the normal number of pricing changes that we make in the Americas, which is part of how we've dealt so effectively with the impact of tariffs. But the real opportunity of dynamic pricing and the database margin optimization capability that comes with it is already supporting gross margin expansion in Americas, and we will be rolling this out across the group more widely over the next couple of years. And these investments are just examples of how we're better supporting both suppliers and customers and enhancing the value that we create for them.

Kate shared with you a bit earlier the growth that upgrading our e-procurement solution is already delivering, and we continue to invest in our other digital procurement solutions for upgrade next year. Our investment in process and technology, as Kate alluded to, is also repositioning our integrated supply business, RSIS, which delivered strong growth in revenue and much improved profitability in the first half, which is all evidence that our solutions and services focus is driving much improved strategic engagement, and importantly, product pull-through and enhanced value.

I'd also like to call out the investments that we've made in the first half to improve our digital experience, which is also contributing to our performance. Our investment in enhanced findability tools have driven a 2% improvement to more than 18% in our Add to Cart rate when a customer searches for product on our website. Our new basket and checkout functionality has resulted in a 5% improvement in basket to order conversion, which is now up to 41%. We've launched an upgraded version of our enhanced digital platform in North America in the first half, as you know, and we continue to tune that platform.

Just an example of how much more effective it is, our website load times are now a third quicker compared to the old website. We also continue to tune our delivery promise solution that we launched last year. That's already resulting in fewer cancellations and returns, but is importantly now beginning to yield increasingly granular data, which will allow commercialization of artificial intelligence and machine learning optimized decisions, particularly in the areas of stock availability, inventory management and pricing.

Kate's already talked about much of what we have achieved to enhance the efficiency of our physical, digital and process infrastructure across the group, and that is an ongoing initiative. But it's important to realize that we have now delivered sustainable restructuring and integration savings, totaling over GBP 47 million over the last 2 years, and that's more than we anticipated at the outset. We're also now well into the detailed plans that will deliver at least an additional 150 basis points of margin that we referred to as potential upside in our Capital Markets Day over a year ago.

But it isn't just about cost reduction. As an example, our delivery to promise investment that I mentioned earlier is also allowing us to do things like optimize product flows through our distribution network. In the first half, we reduced the number of times we handled a product more than once from 52% to 40%, clearly reducing our cost to serve, and importantly, also reducing our carbon footprint. We see lots of opportunity to further optimize this with more data going forward. All of these efforts around improving our infrastructure is driving significant improvement in our future operating leverage.

So notwithstanding a decent in-line financial performance despite the challenging, albeit, a bit more stable markets, I hope this presentation has highlighted for you the real reason why I'm pleased with the first half performance. The change in investment we're making is already delivering better revenue resilience and continued outperformance. It's delivering growth in our accelerators and areas of focus, such as our corporate customer segment, RS PRO and our solutions business. It's driving improvements in our gross margin, in part driven by our investments in new pricing technology and capability, and we're also exercising good cost control and improved efficiency.

And always more importantly for me, it confirms that RS is uniquely positioned in fragmented markets with attractive through-cycle growth characteristics. We have an increasingly differentiated technical and digital product and service solutions offer, which positions us to continue to drive market share gains. We are improving the efficiency of our global infrastructure, which will drive operating leverage and significant margin expansion over time. And we can deliver value-creative growth through disciplined acquisitions. And although we've not made any in the first half, this was a result of value discipline, not a lack of opportunity, and we have a good pipeline going into the second half.

Most importantly, it's further evidence to me that our medium-term financial targets to grow revenues at twice the market with mid-teens adjusted operating margins, over 80% cash conversion and over 20% return on invested capital are more than achievable, and this will all deliver exciting sustainable value creation for all of our stakeholders over time.

That's the end of the formal presentation. Thank you for listening. And I'd now like to open the call up to any questions you might have.

[Operator Instructions] Our first question comes from David Brockton from Deutsche Numis.

Can I ask 3 quick ones, please? Firstly, on the U.S. I guess that's a region where you have a little bit more visibility, or at least historically have done. Can you just touch on what the book-to-bill looks like there? The second question relates to Germany. Clearly, that's still been a tough region for you. Can you maybe give any insight as to whether you're seeing any signs of improvement in that region?

And then the final question relates to some of the improvements that you've touched on, the share gains as well, that you clearly set out. The one sort of lagging indicator or indicator that's still off a little bit looks like the net promoter score, which is down year-on-year. Can you maybe just give any insight into what you think is happening there, please?

Thanks, David. Yes, U.S. book-to-bill rates stable to slightly positive in North America; in Mexico, stable-ish. I think what we are seeing in Mexico is a continued deferral of some quite big capital projects. So although the book-to-bill rate looks okay, we do see pretty consistent deferral. We haven't seen that capital investment spend loosen up yet, but generally pretty solid.

In Germany, yes, it remains difficult. There is the hope that stimulus will eventually feed through both to industrial confidence and to investment. I mean the one thing about Germany is that lapping means the pace of decline is slowing. We have new leadership in Germany, and I'm very confident that we're positioned to recover or to benefit from recovery in Germany when it happens. But no major signs of that happening yet, but equally, Germany is a lot more stable than it was even 6 months ago.

Then lastly, the NPS score that you referred to, David. The way we report NPS is on a rolling lagging basis -- 12-month basis. We did anticipate internally a decline in our NPS score, both in Europe and in North America, firstly with the launch of DTP, and secondly with the introduction of our new digital commercial -- commerce engine. I think, pleasingly, the monthly recovery in NPS has actually followed or slightly exceeded, if I am honest, our own expectations. So whilst the externally reported number still looks a bit weak, if you look at the movement that we can see internally month-on-month, we're on a very good trajectory on NPS.

[Operator Instructions] Our next question comes from Michael Donnelly from Investec.

Just a couple from me, please, and they're both about RS PRO. Now that it's 14% of group, and we've seen great strength in the US, albeit from a low base, should we be thinking about a sustained mid-single-digit growth trajectory for that product in the medium term, or is it more likely to moderate to group growth at some point?

And related to that, I think you've mentioned the potential in the past for RS to reach about 1/5 of group revenues. Could you comment on that potential, given the recent performance of the period?

Thanks, Michael. So we have seen a good performance for RS PRO in the first half. Given the very low base we're starting from in America, I am not sure that we're celebrating victory there quite yet. There's a lot of work to do to build both recognition and understanding of the RS PRO brand to make sure we've got the right products stocked for our U.S. customer base and are actively selling and promoting the brand in the right way. I do think you should expect RS -- I mean it will be a little choppy, but I do expect, or I do think you should expect to continue to see RS PRO growth outperform the broader group growth over time.

And with reference to sort of medium and long-term targets, I'm not sure we've gone out there with a formal position on where our RS PRO brand should get to. But if you look at world-class distributors, I think your comments about between 20% and 25% of revenue being about the right level for a private label products. I don't think we're necessarily disagreeing with that. It takes time to get there, and we're on a journey with RS PRO that's not yet finished.

We currently have no further questions. And with that, this concludes today's call. We thank everyone for joining, and you may now disconnect your lines.

Thanks, everybody.