5 March 2024
Dissemination of a Regulatory Announcement that contains
inside information according to REGULATION (EU) No 596/2014
(MAR)
Travis Perkins plc, a leading
partner to the construction industry, announces its unaudited full
year results for the year to 31 December 2023
A challenging year in weak market
conditions; driving actions to support profit recovery and enhance
cash generation
Protecting market position in
challenging conditions
-
Progressive downturn in new build
housing and private domestic RMI markets leading to Group revenue
(2.7)% lower than prior year
-
Combination of lower volumes,
overhead cost inflation and rapid commodity price deflation in H2
resulted in full year adjusted operating profit of £180m (2022:
£295m)
-
Invested to protect and build
market positions with market share gains in both Toolstation and
Travis Perkins General Merchant
Transforming the operating model to
build a stronger business
-
Step change reduction in non-branch
cost base delivered with £35m annualised savings
-
Working on a plan for a potential
exit of Toolstation France; strategic review of options for
Toolstation Benelux
-
Optimising Benchmarx branch network
with focus on integrated offer within destination General Merchant
branches and profitable standalones
-
Continued rationalisation of legacy
Toolstation UK supply chain, following successful opening of the
new Pineham distribution centre
-
Delivering profit enhancements
through simplification of Group structures, lowering supply chain
costs and harnessing benefits from new technology
-
Operating profit of £110m (2022:
£285m) reflects trading performance and adjusting items of £60m
recognised in 2023 (of which around £16m is cash) related to
impairments in Toolstation France and Benchmarx, together with
restructuring actions
Enhancing cash generation to support
future capital allocation
-
Reduced capital expenditure
requirements in near term; £80m guidance for 2024
-
Review of working capital
opportunities underway
-
Refinancing completed, supporting
robust balance sheet; no funding maturities before 2026
-
In line with the Board’s policy,
2023 proposed full year dividend of 18.0 pence per share (2022:
39.0 pence per share)
£m (unless otherwise
stated)
|
Note
|
2023
|
2022
|
Change
|
Revenue
|
6
|
4,862
|
4,995
|
(2.7)%
|
Adjusted operating profit¹
|
7
|
180
|
295
|
(39.0)%
|
Adjusted earnings per share¹
|
14b
|
45.7p
|
94.6p
|
(51.7)%
|
Return on capital employed¹
|
17
|
6.3%
|
10.8%
|
(4.5)ppt
|
Net debt / adjusted EBITDA¹
|
18
|
2.6x
|
1.8x
|
(0.8)x
|
Ordinary dividend per share
|
13
|
18.0p
|
39.0p
|
(53.8)%
|
Operating profit
|
7
|
110
|
285
|
(61.4)%
|
Profit after tax
|
|
38
|
192
|
(80.2)%
|
Basic earnings per share
|
|
18.1p
|
90.8p
|
(80.1)%
|
(1) Alternative performance measures
are used to describe the Group’s performance. Details of
calculations can be found in the notes listed.
Nick Roberts, Chief Executive Officer, commented:
“Ongoing economic challenges have significantly impacted our
trading performance, driven by weakness in the new build housing
and domestic RMI sectors, and compounded by deflationary pressures
on commodity products. Faced with these challenges, we have
invested to protect and build our leading market
positions.
With market conditions expected to remain a headwind through
2024, the business is fully focused on improving profitability and
enhancing cash generation. We have successfully acted to optimise
our cost base and are actively addressing the impact of our
loss-making businesses. We are also accelerating changes to our
operating model, leveraging our scale to create a simpler, more
efficient business. This will be achieved by simplifying our
operational structures, consolidating our supply chain, creating
shared procurement capability, and embedding new
technology.
While the timing of recovery in our end markets is uncertain,
the long-term growth drivers of our industry remain robust. The
proactive steps we are taking to rebuild profitability and
strengthen our balance sheet will create a more resilient business
and, together with our strong customer relationships and
differentiated offer, will see the Group well positioned to emerge
stronger when markets recover.”
Analyst Presentation
Management are hosting a results presentation at 8.15am. For
details of the event please contact the Travis Perkins Investor
Relations team as below. The presentation will also be available
via a listen-only webcast - please register at the following
link:
https://travis-perkins-2023-full-year-results.open-exchange.net/
Enquiries:
Travis Perkins
|
|
FGS Global
|
Matt Worster
|
|
Faeth Birch / Jenny Davey / James Gray
|
+44 (0) 7990 088548
|
|
+44 (0) 207 251 3801
|
matt.worster@travisperkins.co.uk
|
|
TravisPerkins@fgsglobal.com
|
|
|
|
Cautionary Statement:
This announcement contains “forward-looking statements” with
respect to Travis Perkins’ financial condition, results of
operations and business and details of plans and objectives in
respect to these items. Forward-looking statements are sometimes,
but not always, identified by their use of a date in the future or
such words as “anticipates”, “aims”, “due”, “could”, “may”, “will”,
“should”, “expects”, “believes”, “seeks”, “intends”, “plans”,
“potential”, “reasonably possible”, “targets”, “goal” or
“estimates”, and words of similar meaning. By their very nature
forward-looking statements are inherently unpredictable,
speculative and involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements. These factors include, but are
not limited to, the Principal Risks and Uncertainties disclosed in
the Group’s Annual Report and as updated in this statement, changes
in the economies and markets in which the Group operates; changes
in the legislative, regulatory and competition frameworks in which
the Group operates; changes in the capital markets from which the
Group raises finance; the impact of legal or other proceedings
against or which affect the Group; and changes in interest and
exchange rates. All forward-looking statements, made in this
announcement or made subsequently, which are attributable to Travis
Perkins or any other member of the Group or persons acting on their
behalf are expressly qualified in their entirety by the factors
referred to above. No assurances can be given that the
forward-looking statements in this document will be realised.
Subject to compliance with applicable law and regulations, Travis
Perkins does not intend to update these forward-looking statements
and does not undertake any obligation to do so. Nothing in this
document should be regarded as a profits forecast.
Without prejudice to the above:
(a) neither Travis Perkins plc nor any other member of the
Group, nor persons acting on their behalf shall otherwise have any
liability whatsoever for loss howsoever arising, directly or
indirectly, from the use of the information contained within this
announcement; and
(b) neither Travis Perkins plc nor any other member of the
Group, nor persons acting on their behalf makes any representation
or warranty, express or implied, as to the accuracy or completeness
of the information contained within this announcement.
This announcement is current as of 5th March 2024, the date
on which it is given. This announcement has not been and will not
be updated to reflect any changes since that date.
Past performance of the shares of Travis Perkins plc cannot
be relied upon as a guide to the future performance of the shares
of Travis Perkins plc.
Summary
2023 was a challenging year for the Group as a combination of
macroeconomic uncertainty, progressively weakening end market
demand, sharp deflation on commodity products in the second half
and overhead inflation made business planning difficult, weighing
heavily on the Group’s earnings performance during the year.
Reflecting the expectation of continued challenging market
conditions, management’s primary focus is now to drive efficiencies
through the transformation of the Group’s operating model and
prioritise capital allocation to support the recovery of
profitability and reduction of leverage in the medium
term.
2023 Performance
The Group delivered revenue of £4,862m, down (2.7)% versus
2022. The decline in revenue was driven by the Merchanting
businesses with rising interest rates leading to a significant
reduction in new build housing activity. A lack of secondary
housing transactions, coupled with weak consumer confidence and
pressure on household finances, resulted in the domestic RMI market
also remaining subdued. Toolstation saw good revenue growth in both
the UK and Europe with maturity benefits being realised and further
market share gains.
Adjusted operating profit of £180m was £(115)m, or (39.0)%,
lower than in 2022 with the prior year reported adjusted operating
profit also including a £15m restructuring charge. Around £(64)m of
the profit decline resulted from lower sales volumes whilst
approximately £(24)m was attributable to lower gross margins, with
deflation on timber products in the second half a significant
contributory factor.
Although the Group delivered overhead savings in 2023 of
around £35m, the remaining profit reduction was due to these
savings being more than offset by overhead increases. The majority
of these increases related to inflation, primarily on salaries, and
included an £8m cost-of-living payment in January 2023. The
increase in overheads also included £(20)m investment in
Toolstation, primarily in the new distribution centres at Pineham
(UK) and Rotterdam (Netherlands and Belgium) plus the ongoing
expansion of the European network.
Transformation of the Group’s operating model
Given the significant impact of the macroeconomic environment
on the Group’s profitability, and with uncertainty remaining as to
the timing and speed of recovery in the Group’s key end markets,
management has commenced further significant actions which will
transform the business for the future.
The first phase of this review, completed in the fourth
quarter, will deliver further cost savings of around £35m in 2024,
primarily from a reduction in central and regional headcount and
the closure of the Toolstation Bridgwater distribution
centre.
The next phase commenced in February 2024 with 39 standalone
Benchmarx branches closed as part of a review of the strategy of
the business. The focus is now on optimising the profitability of
the remaining standalone branches and growing the network through
integrated solutions in new General Merchant branches which provide
a lower cost model with a convenient customer journey.
In March 2024 the Group announced the proposed closure of the
Toolstation Daventry distribution centre which represents the next
stage of supply chain consolidation within Toolstation
UK.
Work to deliver further structural efficiencies will continue
over the medium term and be focused on the following
areas:
-
Supply chain consolidation -
reviewing and optimising the Group's supply chain to deliver
greater economies of scale and efficiencies
-
Technology enablement - driving
benefits from new technology starting with the implementation of a
new Oracle finance system to improve processes, data, and
control
-
Simplifying our structures -
streamlining the interactions between businesses to enhance the
customer experience
-
Shared procurement capability -
consolidating separate procurement functions across businesses to
harness the buying power of the Group’s combined scale
Adjusting items
There were £60m of adjusting items in the year (2022: nil) as
set out below:
|
£m
|
Restructuring charge
|
17
|
Benchmarx branch closures
|
10
|
Toolstation France impairment
|
33
|
Total
|
60
|
The restructuring charge relates primarily to severance
payments made as a result of headcount reductions in Q4 2023, the
majority of these roles being in central functions or regional
sales and support teams. Also included in the charge are the costs
related to the closure of the Toolstation UK Bridgwater
distribution centre and other supply chain restructuring
activity.
The charge associated with the Benchmarx branch closures
related to fixed asset impairments and property closure
costs.
The Toolstation France impairment charge relates to the
write-down of goodwill, property and right-of-use assets under
IAS36.
Capital structure and shareholder returns
The Group has previously set a medium-term leverage target of
1.5x – 2.0x net debt / adjusted EBITDA (on an IFRS 16 basis), this
target range being consistent with the maintenance of investment
grade credit metrics. The Group’s balance sheet remains robust with
the refinancing of the 2023 bond completed during the year and the
renewal of the revolving credit facility of £375m (see “Funding”
section for more details) providing adequate liquidity for its
future plans.
However, with net debt / adjusted EBITDA rising to 2.6x at
the year-end, management has set out the following medium-term
capital allocation priorities:
-
Maintaining an investment grade
credit rating by returning leverage to the target range as soon as
possible
-
A disciplined approach to capital
allocation, focused on maintaining asset quality and sources of
competitive advantage
-
Improving working capital
management and an ongoing review of loss-making
activities
-
An attractive and sustainable
dividend
Taking into account all of these factors, for 2023 the Board
is recommending a final dividend of 5.5 pence per share (2022: 26.5
pence per share) to give a full year dividend of 18.0 pence per
share (2022: 39.0 pence per share), in line with the Group’s
previously communicated policy.
The commitment to lowering leverage will result in a planned
reduction in capital expenditure to £80m in 2024 (compared to
medium-term guidance of £125m). Property activity will continue in
order to enhance the quality of the Group’s branch network but with
the objective of generating a cash surplus from property
transactions in the year.
Outlook
A recovery in the UK construction sector is unlikely to
gather any momentum before the UK general election is concluded
with the Group’s customers, large and small, inevitably waiting to
see if there is a post-election government stimulus package for the
sector and also seeking clarity on the future direction of interest
rates.
Mindful of these challenges, management is planning for
another year of weak demand, with overhead and cash management
actions supporting financial performance. Lead indicators and
customer feedback will be closely monitored to inform further
actions during the year. Pricing benefit is expected to be minimal
in 2024 with lower timber pricing rolling over into H1 and limited
manufacturer increases.
Whilst it is still early in the trading year, the Group has
seen a continuation of the weak trading environment experienced in
the second half of 2023. Accordingly, management's best estimate at
this stage is that FY24 adjusted operating profit will be in the
range of £160m to £180m, inclusive of around £10m of property
profits and around £(20)m of losses in Toolstation
France.
Technical guidance
The Group’s technical guidance for 2024 is as
follows:
-
Expected ETR of around 29% on UK
generated profits
-
Base Capital expenditure of around
£80m
-
Property profits of around
£10m
Segmental performance Merchanting
|
2023
|
2022
|
Change
|
Revenue
|
£4,036m
|
£4,220m
|
(4.4)%
|
Adjusted operating profit
|
£212m
|
£314m
|
(32.5)%
|
Adjusted operating margin
|
5.3%
|
7.4%
|
(210)bps
|
ROCE
|
9%
|
15%
|
(6)ppt
|
Branch network
|
769
|
767
|
2
|
Note - all figures above exclude
property profits
The Merchanting segment had a challenging year with revenue
down by (4.4)% and adjusted operating profit reduced by (32.5)% to
£212m, reflecting the high operational gearing of the Merchant
businesses. Revenue decline was consistent although the drivers
moved significantly through the year with pricing starting off at
elevated levels due to the rollover of 2022 increases before
falling away rapidly. Deflation on commodity products, notably
timber, became a major factor in the H2 with overall pricing
turning negative, having been +9% in Q1. By contrast, volumes
started the year weakly, driven by a reduction in new build housing
activity, before levelling off in H2 as comparatives eased and
actions on pricing delivered market share gains in the General
Merchant.
Throughout a difficult year, the Merchant businesses remained
focused on meeting customers’ needs, notably in the second half
when pricing was adjusted to reflect the weak demand environment
and ensure that existing customers were retained alongside winning
new work. There was continued progress on the development of
digital capability and increased penetration of higher margin,
value-added services, particularly Hire which delivered revenue
growth of 6%
The private domestic RMI market, the Merchant segment's
largest end market which is primarily serviced by the Group’s
General Merchant business, remained depressed throughout the year.
Pressures on household finances, the significant rise in the costs
of building materials and labour and the rise in the cost of
borrowing have all contributed to lower levels of activity in the
renovation and improvement market.
The private domestic new-build market, primarily serviced by
Keyline, CCF and Staircraft working with national and regional
housebuilders, was significantly impacted by the economic turmoil
in autumn 2022 with activity down by around one-fifth in the year.
This reduction in activity has weighed heavily on the performance
of all three businesses with each deriving at least half of their
revenue from this customer base in normal market
conditions.
The Merchant segment’s other end markets - commercial,
industrial and public sector - which represent around half of the
segment’s revenue, remained relatively stable, supported by
long-term projects. This stability was reflected in a more
resilient performance in BSS, which derives the majority of its
revenue from these sectors, and in the Group’s Managed Services
business where revenue increased by 5% as the business continues to
benefit from its tailored proposition to partner with social
housing providers.
Adjusted operating margin reduced by (210)bps as a result of
lower gross margins and high levels of operational gearing in the
Merchant businesses. Overhead inflation, mainly driven by payroll
costs, remained elevated with underlying inflation of around 5%.
Cost actions and volume related savings of around £35m in 2023
mitigated the overall cost increase to around 1% for the
year.
Toolstation
|
2023
|
2022
|
Change
|
Revenue
|
£826m
|
£775m
|
6.6%
|
Like-for-like growth
|
4.0%
|
(3.7)%
|
|
Adjusted operating profit - UK
|
£23m
|
£21m
|
9.5%
|
Adjusted operating profit - Europe
|
£(37)m
|
£(30)m
|
(23.3)%
|
Adjusted operating profit - Total
|
£(14)m
|
£(9)m
|
(55.6)%
|
Adjusted operating margin
|
(1.7)%
|
(1.2)%
|
(50)bps
|
ROCE
|
(2)%
|
(2)%
|
-
|
Store network (UK)
|
570
|
563
|
7
|
Store network (Benelux)
|
119
|
113
|
6
|
Store network (France)
|
51
|
45
|
6
|
Note - all figures above exclude
property profits
Toolstation made good progress during the year with 6.6%
sales growth demonstrating the businesses’ ability to win share in
difficult markets.
In the UK, where sales grew by 5.3%, network expansion was
limited in the year to a net seven new stores reflecting a
combination of market outlook, significant investment in the
network in recent years and management focus on the opening of the
new distribution facility in Pineham, Northamptonshire. Pineham
opened in Q3 with 500,000 square feet of capacity and
semi-automation technology providing distribution capability as the
business grows over the next decade. As a result of Pineham coming
on-line, the Bridgwater distribution centre was closed in Q2 2023.
A further review of the retail distribution network proposed
closing the Daventry distribution centre which was announced in
Q1.
UK adjusted operating profit grew by 9.5% to £23m which
included around £13m of higher operating costs related to start-up
and dual running costs at Pineham. Management expects to recover
these costs over the next three years as supply chain efficiencies
come through.
In September the Toolstation UK management team set out their
vision for the future of the business at a Capital Markets Update
with the ambition to grow revenue to £1bn by 2027 with operating
margin increasing to around 8% through scale efficiencies and
margin enhancement opportunities. The materials from the event can
be accessed via the following link:
https://www.travisperkinsplc.co.uk/investors/results-reports-and-presentations/?year=2023
Toolstation Europe
France
Toolstation France delivered sales growth of 29% in the year
but losses increased to £(18)m as six new stores were added
alongside further investment in infrastructure.
Despite some positive progress in the past year, the business
in France faces long-term challenges which significantly increase
the time and investment needed to achieve profitability. These
challenges include:
-
Building brand
awareness
-
Serving the trade in a less
populated region
-
Ongoing weak end-market
demand
Taking these factors into consideration, and with forecast
losses expected to increase to £(20)m in 2024, management has
concluded that the investment required to reach profitability is no
longer sustainable and today confirms that it is working on a plan
for a potential exit of the business. Any decision would be subject
to a prior consultation process with the relevant employee
representatives.
Benelux
Although sales grew by 11%, performance overall in Benelux in
2023 was significantly below management expectations with a loss of
£(19)m in the year (2022: £(15)m). The increase in losses was a
result of weak gross margins, cost inflation and the additional
costs of the second distribution centre alongside six new
stores.
Management expects losses to narrow to around £(12)m in 2024
in Benelux and now anticipates that the Netherlands business will
reach break-even point, on an annual basis, by 2025 with Belgium
forecast to break-even by 2028. With end-market conditions expected
to remain challenging in the near term and the extended period to
reach profitability, management has commenced a strategic review of
both businesses and will provide a further update as soon as the
review is concluded.
Property
The Group generated property profits of £15m in the year,
with £67m of cash proceeds. The main transaction in the year was
the sale-and-leaseback of seven sites in March 2023 for
£23m.
The Group continued with its policy of reinvesting freehold
sale proceeds with the purchase of a 6.25 acre industrial site in
Selsdon, near Croydon for £22m the major purchase during the
year.
Building for the future
The Group made good progress towards its ambitious carbon
reduction targets, as detailed below:
-
Reduction of 7% in absolute Scope 1
& 2 carbon, now 33% below the 2020 target baseline
-
Scope 3 carbon reduced by 3% in
2023, now 6% below the 2020 target baseline. The ratio of Scope 3
carbon emissions to revenue has improved by 28% against the 2020
baseline
-
11% of revenue in 2023 was from
products for which the Group now holds Environmental Product
Declarations, enabling the provision of product-level carbon
reports to customers to help them in calculating and managing their
own carbon.
-
The Group is switching up to 1,100
forklift trucks from diesel to electric by mid-2024 in a
multi-million pound investment that is one of the largest change
programmes of its kind. Once complete, it is estimated that this
change will reduce the Group’s Scope 1 carbon emissions by 6,600
tonnes per annum.
Recognising the importance of leading change in the
construction industry, the Group became a partner of the National
Retrofit Hub, with representation on all its working groups,
helping to shape retrofit planning for the UK. According to market
estimates, the need to retrofit around 30 million UK properties in
the next fifteen years could require investment of over £300
billion. The Group was also ranked in the top 8% of companies
globally by CDP for its engagement with suppliers on climate
change.
Developing a skilled workforce is key to the Group being able
to deliver the expertise and service required to remain close to
our customers In 2023 a total of 414 colleagues and industry
partners graduated in apprenticeships facilitated by LEAP, the
Group’s Early Careers and Apprenticeship provider. The 1,000th
apprentice graduated through the programme run by the Group in
2023, a major milestone on the journey towards 10,000 graduated
apprentices by 2030. The Group was awarded a ‘Good’ Ofsted rating
across all aspects of its Apprenticeship programme.
CEO Nick Roberts became the Construction Leadership Council
(“CLC”) Industry Sponsor for People and Skills, to support delivery
of the agreed workstreams and energise colleagues, attract diverse
talent, enhance skills for the future and ensure policy development
addresses the sector’s business requirement.
Travis Perkins plc is a founding member of The Construction
Inclusion Coalition (‘CIC’), which was established by CEOs at
leading organisations, including Aliaxis, Baxi, Bradfords,
Highbourne Group, Ibstock, Knauf, Wavin, Wolseley, the Builders
Merchants Federation and the National Merchant Buying Society, to
raise standards on equity, diversity and inclusion, with an
immediate focus on gender representation.
Financial Performance Revenue
analysis
The Merchanting business saw consistently challenging trading
conditions across the year, although the drivers of performance
varied significantly. At the start of the year price inflation
remained high, largely driven by the rollover of 2022 increases. By
contrast, volumes were weak, particularly in the new house building
sector following the impact of the “mini-budget” in late
2022.
From May onward, a sharp decline in the price of commodity
products, notably on timber, saw the overall basket of goods move
into deflation as price reductions were passed on to customers.
Volumes stabilised in the second half as comparatives eased and
more competitive pricing delivered market share gains in the
General Merchant.
Toolstation also gained market share across the year in both
the UK and Europe with volume growth despite a declining market and
robust pricing. Maturity benefits from the investment in the store
network and customer proposition continue to come
through.
Volume, price and mix analysis
|
Merchanting
|
Toolstation
|
Group
|
Price and mix
|
1.3%
|
5.4%
|
1.9%
|
Like-for-like volume
|
(5.7)%
|
(1.4)%
|
(5.0)%
|
Like-for-like revenue
growth
|
(4.4)%
|
4.0%
|
(3.1)%
|
Network changes and acquisitions / disposals
|
(0.4)%
|
2.3%
|
0.0%
|
Trading days
|
0.4%
|
0.3%
|
0.4%
|
Total revenue growth
|
(4.4)%
|
6.6%
|
(2.7)%
|
Quarterly revenue analysis
|
|
Total Revenue
|
Like-for-like revenue
|
|
|
2023
|
2022
|
2023
|
2022
|
Merchanting
|
Q1
|
(3.2)%
|
17.9%
|
(4.2)%
|
15.3%
|
Q2
|
(5.6)%
|
9.2%
|
(5.2)%
|
8.5%
|
H1
|
(4.5)%
|
13.3%
|
(4.8)%
|
11.7%
|
Q3
|
(3.4)%
|
11.5%
|
(2.9)%
|
8.7%
|
Q4
|
(5.1)%
|
4.7%
|
(5.2)%
|
2.3%
|
H2
|
(4.2)%
|
7.3%
|
(4.1)%
|
5.6%
|
FY
|
(4.4)%
|
10.3%
|
(4.4)%
|
8.7%
|
Toolstation
|
Q1
|
8.6%
|
(6.0)%
|
4.6%
|
(11.9)%
|
Q2
|
9.7%
|
(3.2)%
|
7.2%
|
(9.2)%
|
H1
|
9.0%
|
(4.6)%
|
5.9%
|
(10.6)%
|
Q3
|
7.3%
|
6.1%
|
4.4%
|
0.2%
|
Q4
|
1.1%
|
12.7%
|
0.0%
|
7.2%
|
H2
|
4.1%
|
8.9%
|
2.2%
|
3.7%
|
FY
|
6.6%
|
1.9%
|
4.0%
|
(3.7)%
|
Total Group
|
Q1
|
(1.5)%
|
13.6%
|
(2.9)%
|
10.5%
|
Q2
|
(3.3)%
|
7.1%
|
(3.3)%
|
5.6%
|
H1
|
(2.5)%
|
10.3%
|
(3.2)%
|
7.9%
|
Q3
|
(1.8)%
|
10.7%
|
(1.8)%
|
7.4%
|
Q4
|
(4.0)%
|
6.0%
|
(4.3)%
|
3.1%
|
H2
|
(2.9)%
|
7.5%
|
(3.0)%
|
5.3%
|
FY
|
(2.7)%
|
8.9%
|
(3.1)%
|
6.6%
|
Operating profit
£m
|
2023
|
2022
|
Change
|
Merchanting
|
212
|
314
|
(32.5)%
|
Toolstation
|
(14)
|
(9)
|
(55.6)%
|
Property
|
15
|
25
|
(40.0)%
|
Unallocated costs
|
(33)
|
(35)
|
5.7%
|
Adjusted operating profit
|
180
|
295
|
(39.0)%
|
Amortisation of acquired intangible
assets
|
(10)
|
(10)
|
|
Adjusting items
|
(60)
|
-
|
|
Operating profit
|
110
|
285
|
|
Finance
charge
Net finance charges were in line with prior year at £40m (see
note 10 for details).
Taxation
The tax charge before adjusting items was £44m (2022: £55m)
giving an adjusted effective tax rate (adjusted ‘ETR’) of 31.5%
(standard rate: 23.5%, 2022 actual: 21.7%). The adjusted ETR rate
is substantially higher than the standard rate due to the effect of
expenses not deductible for tax purposes, the largest item being
unutilised overseas losses.
The statutory tax charge for 2023 was £32m (2022: £53m)
giving an effective tax rate of 45.6% (2022: 21.6%). This is higher
than the adjusted ETR as a result of the tax effect of the
impairment of goodwill.
Earnings per share
The Group reported a total profit after tax of £38m (2022:
£192m) resulting in basic earnings per share of 18.1 pence (2022:
90.8 pence). Diluted earnings per share were 17.8 pence (2022: 89.2
pence).
Adjusted profit after tax was £96m (2022: £200m) resulting in
adjusted earnings per share (note 14) of 45.7 pence (2022: 94.6
pence). Diluted adjusted earnings per share were 45.0 pence (2022:
92.9 pence).
Cash flow and balance sheet Free cash
flow
£m
|
2023
|
2022
|
Change
|
Group adjusted operating profit
excluding property profits
|
165
|
270
|
(105)
|
Depreciation of PPE and other non-cash movements
|
100
|
97
|
3
|
Change in working capital
|
(22)
|
(76)
|
54
|
Net interest paid (excluding lease interest)
|
(25)
|
(17)
|
(8)
|
Interest on lease liabilities
|
(26)
|
(21)
|
(5)
|
Tax paid
|
(41)
|
(58)
|
17
|
Adjusted operating cash
flow
|
151
|
195
|
(44)
|
Capital
investments
|
|
|
|
Capex excluding freehold transactions
|
(109)
|
(110)
|
1
|
Proceeds from disposals excluding freehold
transactions
|
2
|
10
|
(8)
|
Free cash flow before freehold
transactions
|
44
|
95
|
(51)
|
The Group delivered free cash flow conversion of 81% in the
year (2022: 67%). Working capital increased year on year driven by
a reduction in other creditors. Trade debtors and payables reduced
in line with volumes and revenue across the Group whilst stock
remained flat.
Capital investment
£m
|
2023
|
2022
|
Strategic
|
51
|
75
|
Maintenance
|
52
|
28
|
IT
|
6
|
7
|
Base capital expenditure
|
109
|
110
|
|
|
|
Freehold property
|
33
|
38
|
Gross capital expenditure
|
142
|
148
|
Disposals
|
(68)
|
(23)
|
Net capital expenditure
|
74
|
125
|
Base capital expenditure in cash terms was in line with prior
year and below the Group’s medium-term guidance (of £125m per
annum), reflecting the weaker demand outlook.
Strategic capex was £(24)m lower than prior year, reflecting
a significant slowdown in the Toolstation store rollout in both the
UK and Europe, with new 23 stores in 2023 compared to 70 in 2022,
and the spend on Toolstation distribution capacity in the prior
year.
Maintenance capex increased by £24m, principally as a result
of overdue fleet replacement.
Uses of free cash flow
£m
|
2023
|
2022
|
Change
|
Free cash flow
|
44
|
95
|
(51)
|
Investments in freehold property
|
(33)
|
(38)
|
5
|
Disposal proceeds from freehold transactions
|
67
|
12
|
55
|
Dividends paid
|
(82)
|
(82)
|
-
|
Net purchase / sale of own shares
|
-
|
(172)
|
172
|
Cash payments on adjusting items
|
(11)
|
(7)
|
(4)
|
Drawdown of borrowings
|
100
|
75
|
25
|
Repayment of bonds
|
(180)
|
(120)
|
(60)
|
Other
|
3
|
-
|
3
|
Change in cash / cash
equivalents
|
(92)
|
(237)
|
|
Cash and cash equivalents reduced by £(92)m in the year
primarily as a result of financing activity. The remaining 2023
bond (£180m) was repaid during the year, being largely replaced
with £100m of US private placement notes (details
below).
In 2022, the Group repurchased £120m of bonds early via a
tender offer as part of the ongoing management of its debt maturity
profile, these bonds being partly replaced by a £75m term loan. The
Group also completed a £240m share buyback programme in 2022 to
return the proceeds of the sale of the Plumbing & Heating
division in 2021.
Net debt and funding
|
31 Dec 2023
|
31 Dec 2022
|
Change
|
Covenant
|
Net debt
|
£922m
|
£819m
|
£(103)m
|
|
Net debt / adjusted EBITDA
|
2.6x
|
1.8x
|
(0.8)x
|
<4.0x
|
Net debt excluding leases
|
£314m
|
£279m
|
£(35)m
|
|
Net debt excluding leases / adjusted EBITDA
|
0.9x
|
0.8x
|
(0.1)x
|
|
Note - All covenant metrics measured post
IFRS16
Overall net debt increased by £103m of which £68m related to
increased lease commitments. The higher lease commitments were
principally a result of the Group investing in a new Toolstation UK
distribution centre, a new manufacturing facility for Staircraft
and the sale-and-leaseback package of seven sites completed in
March 2023.
Funding
As at 31 December 2023, the Group’s
committed funding of £800m comprised:
-
£250m guaranteed notes due February
2026, listed on the London Stock Exchange
-
£75m bilateral bank loan due August
2027
-
A revolving credit facility of
£375m, refinanced in November 2023 and maturing in November
2028
-
£100m of US private placement
notes, maturing in equal tranches in August 2029, August 2030 and
August 2031
As at 31 December 2023, the Group had
undrawn committed facilities of £375m (2022: £400m) and deposited
cash of £102m (2022: £194m), giving overall liquidity headroom of
£492m (2022: £594m).
The Group’s credit rating from Fitch
Ratings was affirmed at BBB-, albeit on negative watch, following a
review in October 2023.
Principal risks and uncertainties
Maintaining a dynamic and effective risk management process
is central to the successful delivery of the Group’s strategic
objectives and building resilience, as the Group manages the
impacts of a challenging external environment, an evolving risk
landscape and continued uncertainty. The Group takes a balanced
approach to manage risks in a proactive, efficient and effective
way, targeted at the most significant risks, particularly where
there is a low tolerance for risk or uncertainty.
The Group’s principal risks are regularly reviewed and
reassessed through a process that considers both internal and
external factors. No principal risks have been added or removed in
the latest risk review and, although all risks and associated
mitigations have evolved over the past year, the overarching trends
and inherent risk levels are assessed to be broadly consistent
year-on-year. As set out in the half year results, the Board no
longer considers the risk trend in relation to supply chain
resilience to be increasing albeit the inherent risk remains high.
The Group has a good track record of navigating through supply
challenges and its well established programme of stock monitoring,
supplier engagement and independent testing helps to ensure a
continuous supply of quality materials. All other risk trends are
unchanged.
Accordingly, the 2023 Annual Report and Accounts will report
risks under the following captions: long-term market trends,
macroeconomic volatility, supply chain resilience, managing change,
climate change & carbon reduction, cyber threat & data
security, health, safety & wellbeing, legal compliance and
critical asset failure.
The Group seeks to capture emerging risks that do not
currently present a significant risk but which may have the
potential to adversely impact its operations in the future and
these are also regularly considered and monitored by the Directors.
The potential for an escalation of the war in Ukraine continues to
be monitored as an emerging risk. The Group continues to ensure
compliance with sanctions and that timber purchases are from
certified sources and exclude timber from Russia or Belarus. In the
event that hostilities escalate in Europe, sourcing and supply
could be impacted,so the situation is closely monitored. More
generally, the Group is exposed to geopolitical risks across its
supply chain, including the direct sourcing operation in China. The
Board is watchful of developments in the Middle East and how unrest
in the region may create further macroeconomic uncertainty and
impact trade relations. There are no other emerging risks
considered significant enough to report at this time.
Consolidated income statement
For the year ended 31 December
2023
£m
|
Notes
|
2023
|
2022
|
Revenue
|
6
|
4,861.9
|
4,994.8
|
Gross profit
|
|
1,305.1
|
1,384.7
|
Charge for impairment losses for trade receivables
|
|
(16.8)
|
(11.0)
|
Selling and distribution
|
|
(835.0)
|
(805.4)
|
Administrative expenses – other
|
|
(297.1)
|
(314.0)
|
Profit on disposal of properties
|
|
15.1
|
25.3
|
Other operating income
|
|
9.1
|
15.7
|
Adjusted operating profit
|
|
180.4
|
295.3
|
Administrative expenses – adjusting items
|
8
|
(60.0)
|
–
|
Administrative expenses – amortisation of acquired intangible
assets
|
|
(10.5)
|
(10.5)
|
Operating profit
|
7
|
109.9
|
284.8
|
Interest on lease liabilities
|
10
|
(26.2)
|
(21.5)
|
Other finance costs
|
10
|
(25.8)
|
(27.5)
|
Finance income
|
10
|
12.1
|
9.2
|
Profit before tax
|
|
70.0
|
245.0
|
Tax
|
11
|
(31.9)
|
(52.8)
|
Profit for the year
|
|
38.1
|
192.2
|
Total profit for the year is all attributable to the owners
of the Company.
Earnings per ordinary share:
|
Notes
|
|
2023
|
2022
|
Adjusted basic earnings per share
|
14
|
|
45.7p
|
94.6p
|
Adjusted diluted earnings per share
|
14
|
|
45.0p
|
92.9p
|
Basic
|
14
|
|
18.1p
|
90.8p
|
Diluted
|
14
|
|
17.8p
|
89.2p
|
The accompanying notes form an integral part of these
financial statements.
Consolidated statement of comprehensive income
For the year ended 31 December
2023
£m
|
Notes
|
2023
|
2022
|
Profit for the year
|
|
38.1
|
192.2
|
Items that will not be reclassified
subsequently to profit and loss:
|
|
|
|
Actuarial loss on defined benefit pension schemes
|
12
|
(41.0)
|
(145.3)
|
Income tax relating to other comprehensive income
|
|
10.2
|
36.3
|
Items that may be reclassified
subsequently to profit and loss:
|
|
|
|
Foreign exchange differences on retranslation of foreign
operations
|
|
(1.2)
|
5.5
|
Fair value (loss) / gain on cash flow hedges
|
|
(1.4)
|
4.3
|
Deferred tax on cash flow hedges
|
|
0.4
|
(1.1)
|
Total other comprehensive loss for the year net of
tax
|
|
(33.0)
|
(100.3)
|
Total comprehensive income for the year
|
|
5.1
|
91.9
|
All other comprehensive income is attributable to the owners
of the Company.
Consolidated balance sheet
As at 31 December 2023
£m
|
Notes
|
2023
|
2022
|
Assets
|
|
|
|
Non-current assets
|
|
|
|
Goodwill
|
|
847.9
|
859.0
|
Other intangible assets
|
|
99.9
|
115.9
|
Property, plant and equipment
|
|
848.4
|
847.3
|
Right-of-use assets
|
|
530.4
|
451.7
|
Long-term prepayments and other receivables
|
|
14.2
|
17.2
|
Deferred tax asset
|
|
18.0
|
15.0
|
Derivative financial instruments
|
|
2.9
|
4.3
|
Retirement benefit asset
|
12
|
100.6
|
135.9
|
Total non-current assets
|
|
2,462.3
|
2,446.3
|
Current assets
|
|
|
|
Inventories
|
|
727.6
|
727.8
|
Trade and other receivables
|
|
689.6
|
725.9
|
Tax debtor
|
|
14.5
|
0.7
|
Cash and cash equivalents, excluding bank
overdrafts
|
|
131.5
|
235.7
|
Total current assets
|
|
1,563.2
|
1,690.1
|
Total assets
|
|
4,025.5
|
4,136.4
|
Equity and liabilities
|
|
|
|
Capital and reserves
|
|
|
|
Issued share capital
|
|
23.8
|
23.8
|
Share premium account
|
|
545.6
|
545.6
|
Cash flow hedge reserve
|
|
2.9
|
4.3
|
Merger reserve
|
|
326.5
|
326.5
|
Revaluation reserve
|
|
10.8
|
12.1
|
Own shares
|
|
(14.1)
|
(34.3)
|
Foreign exchange reserve
|
|
8.4
|
9.6
|
Other reserves
|
|
1.4
|
1.4
|
Retained earnings
|
|
1,135.0
|
1,213.2
|
Total equity
|
|
2,040.3
|
2,102.2
|
Non-current liabilities
|
|
|
|
Interest-bearing loans and borrowings
|
|
445.1
|
349.1
|
Lease liabilities
|
|
518.8
|
438.3
|
Deferred tax liabilities
|
|
92.8
|
96.0
|
Long-term provisions
|
|
3.8
|
4.9
|
Total non-current liabilities
|
|
1,060.5
|
888.3
|
Current liabilities
|
|
|
|
Interest-bearing loans and borrowings
|
|
–
|
192.5
|
Lease liabilities
|
|
89.6
|
74.3
|
Derivative financial instruments
|
|
0.4
|
0.2
|
Trade and other payables
|
|
795.4
|
852.4
|
Short-term provisions
|
|
39.3
|
26.5
|
Total current liabilities
|
|
924.7
|
1,145.9
|
Total liabilities
|
|
1,985.2
|
2,034.2
|
Total equity and liabilities
|
|
4,025.5
|
4,136.4
|