The company’s competitive advantage is largely derived from its highly sophisticated and efficient distribution network, which enables superior delivery speed and scale to rivals.
It’s broad range of simple generic component style products mean that the business operates in a highly fragmented market. RS Group estimate that their market share is less than 1% of the total addressable market, offering significant opportunity for consolidation going forwards, particularly given the number of small scale specialised distributors.
Whilst the business became higher quality under recently departed CEO Lindsley Ruth, high exposure to the cyclical industrial and manufacturing sectors remains and is reflected in like-for-like revenue growth that has ranged from +0.5% to +26% in the last ten years. The forward outlook of these two end market sectors is therefore a key consideration when determining an attractive entry point for RS Group shares.