Announcement of Interim Results Half Year Ended 30 September 2004 9 November 2004

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Announcement of Interim Results Half Year
Ended30 September 20049 November 2004

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IMPROVED SALES, PROFITS AND CASH

• Sales 379.5m up 5.8 from last year
• benefits from sales and marketing initiatives
  coming through
• Sales grew in every region
• UK (2.3), Rest of Europe (2.6), North America
  (23.5), Japan (29.7), Rest of World (7.0)
• Continued active management of operational
  performance
• gross margin maintained
• tight cost management though investment in sales
  and marketing continues
• service levels have been improved
• cash flow strong
• Investments being made to drive and support long
  term sales growth
• Enterprise Business System projects
• new UK catalogue format
• PBTG grew by 13.7 to 51.5m (last year, 45.3m)
• 15.5 increase when adjusted for exchange rates
• effective operational gearing

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SALES GROWTH
Like-for-like
Like-for-like
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UK

• Sales grew 2.3 to 180.0m
• e-Commerce sales up 32, now 22 of total sales
  in RS UK
• PurchasingManager successful
• Growth in both manufacturing and service sectors
• despite difficulties faced by manufacturing
  customers
• Contribution margin reduced by 1.9 points to
  30.4 from 32.3
• gross margin declined slightly
• increased selling and marketing cost
• increased pension contribution

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UK CATALOGUE DEVELOPMENTS

• Radically reformatted catalogue much easier to
  find right products
• Range-based presentation with more information
• 5 volumes (from 7)
• October launch (from September) to increase
  customer impact
• Thoroughly researched

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OTHER UK DEVELOPMENTS

• Driving growth through increased sales contact
  intensity
• out-performance of continuously manned
  territories
• highest growth in high customer contact
  territories (coverage, touches)
• sales growth across most territories
• Increased awareness of RS through Do great
  things campaign
• Significant trade counter sales growth
• successful Managed Stock Replenishment (MSR)
  offer
• close liaison with field sales
• Additional work to address growth
• including new external market research and trials

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STRATEGY NEEDS INTEGRATED BUSINESS PROCESSES
Process and Matrix Organisation

• common Processes
• global organisation
• 1996 - 2000

• new infrastructure
• integrated systems
• new capabilities
• 2000 -

• 1-26 countries
• 1990s

Group Marketing Strategy

• alignment and sharing
• SM investment
• 2000 -

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E-COMMERCE DEMONSTRATES THE BENEFITS OF
INTEGRATION
Single global e-Commerce platform (BV)

• Integration to engine room systems
• multiple

68 front-ends Local language and offer Best of
the best Common and local

• High growth
• Rapid and effective sharing
• eg PurchasingManager
• Global upgrades
• Considerable investment savings

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EBS IS WELL ADVANCED AND WORKS

• EBS operation
• Japan has run an integrated system since launch
• S Asia operates successfully on Asia EBS
  Australasia implementation following S Asia
  learning
• France proven European EBS template that we can
  run our business on

EBS status Japan ? 1999 Asia South
Asia ? Mar 2003 Australasia ? Oct 2003 North
Asia - Apr 2005 Europe France ? Jun
2003 UK - By end 2005 ROE - 2006/7
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INVESTING MORE TO GET THE UK RIGHT

• UK represents Group go-live
• RSUK, Process and OpCo replenishment etc
• H2 calendar 2005
• Incorporating important implementation knowledge
  from France (and Asia) to mitigate UK risk
• more hands on training with working system eg
  MERLIN
• Committing more resources and management time
• expected FY05/FY06 additional costs indicated in
  21 September Trading Update
• FY05 - additional ca 3m business related costs
  (back fills during testing/training and other
  project driven activities)
• FY06 - additional ca 8m split equally between
  business related costs and system related costs
  (direct costs of training, problem solving and
  early life support)
• and 13m stock build
• Confident in implementation and future benefits
• legacy costs, stock turn, efficiencies, customer
  offer, profitability

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REST OF EUROPE

• Sales grew 2.6 (adjusted) to 114.3m
• Europe excluding France grew at 6
• Austria, Spain and Benelux enjoyed double digit
  growth
• France fell by 2.6 but service problems now
  resolved and sales now recovering
• the pressure has been on restoring the service
  levels and winning back the business
• profitability improved from last year
• e-Commerce continues to grow quickly
• sales up 53 on last year to 23 of sales in
  September
• high growth in PurchasingManager in Germany
• Contribution margin up 2.9 points to 21.9 from
  19.0
• gross margin improvement, cost management and
  lower systems costs in France

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ALLIED NORTH AMERICA

• Sales grew 23.5 (adjusted) to 56.2m
• impact of sales and marketing investments
• Customer First programme (revitalising the
  branch network)
• new format catalogue from October 2003 further
  developed for October 2004
• economic backdrop good, but customers now
  expressing uncertainty
• e-Commerce is a great opportunity to be developed
• Gross margin around 38
• increased penetration of larger customers with
  high AOV puts pressure on gross margin
• Contribution grew 29.3 to 7.5m with margin up
  2.0 points to 13.3
• 45.1 contribution growth at constant exchange
  rates demonstrates the positive gearing impact of
  the higher sales

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JAPAN

• Sales grew by 29.7 (adjusted) to 7.8m
• continued development of broader customer base
• customer numbers up 15
• continued success of e-Commerce
• now 47 of sales
• Profitability continues profit of 0.6m from
  loss of 0.6m

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CHINA

• Sales in China/Hong Kong grew 14.3 (adjusted)
• mainland China grew at 17.5 over 30 in
  September
• Same Day Offer successful in Shanghai region
• good customer reaction and sales growing at
  almost 40
• roll out to Beijing in second half
• supported by an extra 1m of stock

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REST OF WORLD

• Overall sales grew 7 (adjusted) to 21.2m
• growth in all areas of Asia
• decline in South Africa (currency)
• e-Commerce in Asia has grown rapidly
• jumped to 19 of sales in September from 7 last
  year

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E-COMMERCE

• Sales increased to 71.1m, up 42.3 on first half
  of last year
• represents 18.7 of sales for first half and
  20.3 of sales in September
• PurchasingManager continues to grow
• total online control provided by the application,
  which is free to customers
• benefits include reduced customer transaction
  costs and improved reporting
• more than 2,700 customers worldwide, up 240
  since March 2004
• Focus on growing sales from our e-Commerce
  leadership
• customer partnerships to drive end-user
  conversion

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PROCESSES

• Supply Chain
• stock remains tightly controlled - stock turn
  2.6x vs 2.5x last year
• service levels improved
• build-up of stock to
• support increased sales
• begin to support Enterprise Business System
  go-live in UK and
• begin to support Same Day Offer extension in
  China
• Product Management
• continued focus on range effectiveness
• Media Publishing
• new design for UK catalogue in October 2004 (roll
  out in due course)
• more information
• products easier to find, compare and choose
• more convenience for customers so stimulating
  sales

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SUMMARY

• Improved sales, profit and cash flow
• sales up across all regions
• Confidence in implementation and future benefits
  of EBS
• template works
• knowledge transfer
• additional investment to get UK right
• Committed to driving growth

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HIGHLIGHTS FIRST HALF 2004/05
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PROFIT LOSS ACCOUNT 1
? Before amortisation of goodwill
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PROFIT LOSS ACCOUNT 2
? Before amortisation of goodwill
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IMPACT OF GOODWILL AMORTISATION
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EARNINGS, CASHFLOW AND DIVIDEND
? Before amortisation of goodwill
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SALES AND PROFIT ANALYSIS
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HALF YEARLY PERFORMANCE
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BALANCE SHEET
As restated for the adoption of UITF 38,
Accounting for ESOP Trusts
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CASH FLOW 1
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CAPITAL EXPENDITURE

• Gross capital expenditure similar to last year

• Second half outlook
• Similar to last year
• FY06 outlook
• Lower than FY05

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CASH FLOW 2
32
TURNOVER BY ORIGIN
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RS UK?
? By origin (RS UK and exports to external
customers). Sales in the UK market (ie
excluding exports) grew 2.1 As restated for
the adoption of UITF 38, Accounting for ESOP
Trusts
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RS REST OF EUROPE?
? By origin (RS in France, Germany, Italy,
Austria, Scandinavia, Ireland, Spain, Benelux) ?
Adjusted for trading days
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ALLIED NORTH AMERICA
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RS JAPAN
? Adjusted for trading days
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RS REST OF WORLD?
? By origin (RS in Australia/New Zealand
China/Hong Kong/Taiwan Singapore/ASEAN
South Africa Chile) ? Adjusted for trading days
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SUMMARY SEGMENT ANALYSIS
Information Systems, e-Commerce, Supply Chain,
Product Management, Media Publishing,
Facilities, Human Resources and Corporate costs ?
Before amortisation of goodwill
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GROUPWIDE PROCESS COSTS

• EBS project costs and depreciation up next year

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PENSIONS UPDATE

• UK defined benefit scheme
• closed to new entrants April 2003
• UK Update
• triennial valuation March 2004 deficit 47.7m,
  net of deferred tax 33.4m
• SSAP24
• UK pension charge for the year expected to
  increase by 2.8m over last year
• 1.4m additional cost recognised during first
  half
• FRS 17 not adopted
• 30 September 2004 estimated UK deficit net of tax
  28m

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SUMMARY

• Continued high growth in Allied (over 20) and
  Japan (30)
• Return to growth of UK business in half year
• Good growth in Rest of Europe (and France getting
  back to growth)
• Exciting results of our same day offer in
  Shanghai
• Continued success of e-Commerce (42 growth)

Sales up, profit up more, net debt
down
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CURRENT TRADING

• In October our sales growth has been about 5
  with a regional pattern similar to the first
  half.
• Managements priorities remain to drive sales
  growth and to manage successfully the major
  changes in systems that will occur during the
  coming year. The Purchasing Managers Indices
  have weakened in recent months and we remain
  cautious on the trading backdrop in our major
  markets.
• The half year performance demonstrates the sales
  and profit potential of the Group and our
  continued investment underlines our confidence in
  our long term prospects.