Travis Perkins plc

Hi, good morning everybody and welcome to the results presentation for the half year for Travis Perkins. For anyone who doesn't know me, I'm Gavin Slark, I'm the CEO and I'm joined today by Duncan Cooper who is our CFO. The agenda for this morning is relatively straightforward. I will just give you one slide of a few headlines. I'll then pass you over to Duncan to take you through the financial review. I will then come back up and just give you a brief overview of where we are with the various businesses and then that should leave us some time for some Q&A and I'll talk you through the process for the Q&A as we go through later on. In terms of the results that we've announced this morning, obviously you'll see their revenue at 2.258 billion, down 1.8% in absolute terms. A chunk of that is down to the sale last year of the staircraft business, and then from a like-for-like perspective, our overall turnover was down just 0.7%. You'll see there also on the gross margin line, we've improved gross margins by 100 basis points. And some of you will remember when we announced the full year results earlier in March, we did talk about gross margin expansion being critical for the future success of the business. And Duncan will talk a little bit more about that later on. In terms of the adjusted operating profit, up by 6.3% to 67 million pounds. But I think one of the standout headlines in terms of the results this morning is where we are in terms of net cash before leases. So you'll see there that we now have net cash before leases of 55 million pounds compared to 103 million pounds at this point last year. so 158 million pounds improvement in 12 months on where we were and also a 51 million pound improvement on where we were in March compared to the year end so I think one of the things that we've got there is a really strong financial underpinning that should give our colleagues our customers and our suppliers a lot of confidence in Travis Perkins looking forward but to take you through the detail of the numbers I'll pass you over to Duncan

Good morning, everyone. Thank you, Gavin. So, I'll start with the usual financial overview. Group revenue of £2.3 billion, down 1.8% on prior year in what remains challenging trading conditions. Adjusted operating profit before property profits in line with prior year at £62 million and including property profits up 6.3% to £67 million. That gives an adjusted earnings per share of 15.1 pence per share, up 13.5% on prior year. And that's a higher relative increase than the profit because of the phasing of the higher property profits in H1 and the lower finance costs incurred in the half as a result of us holding higher cash on deposit balances. net cash at the half was 55 million as Gavin said 158 million pound improvement from the June 2025 net debt position of 103 million and up from the 1 million net cash position we reported at year end representing further evidence of the strong cash focus we've had in the group over the past couple of years accordingly leverage drops 20 bps from year end and 40 bps from June 2025 to 1.9 times and returns to within our desired range of 1.9 1.5 to 2 times sorry finally the board is recommending an interim dividend of four pence per share in line with our prevailing dividend policy and payable on the 6th of November this year On the next slide is the revenue walk for the year and this simply reflects what you can read for yourselves in the latest CPA report or any other widely available market commentary. January and February construction output was impacted by poor weather across all projects. RMI activity remains heavily confidence linked with the bond markets now forecasting two interest rate rises for Q3 and Q4 as opposed to two decreases at the start of the year. new house building activity has stalled new land acquisitions have dried up as house builders are seeking to preserve cash rendering the one and a half million homes in this parliamentary term redundant finally infrastructure is generally a little stronger but remains lumpy and with another cabinet reset and departmental reviews no doubt underway there probably will need to be some tough decisions for the prime minister All of this continues to weigh heavily on volumes and activity levels. But against this backdrop, pricing has become a critical issue. We outlined to you in March that we had proactively increased prices at the start of this year to protect gross margin. The Iran war then necessitated us passing a further round of manufacturers price increases on shortly after it started at the end of February. Some of these increases arrived within days of the conflict starting, initially linked to an anticipated increase in freight costs, and then later where oil is a principal constituent of the product itself. Some of these increases have been significant, such as 15 to 20% on oil-based plastic products, and we would expect a second wave of increases to come through in H2 and H1 next year as hedges for natural gas and oil roll off elsewhere. We are inevitably trying to pass on these increases in full and are generally doing so very successfully but in turn it is difficult to assess what impact this is having on demand. Within this backdrop we're also consciously walking away from low margin or loss making transactions and continue to scrutinise credit limits and overdue debt positions very carefully. Nearly 4,000 construction firms became insolvent in the UK in the year to April 2026 and that rate is sadly increasing. We could undoubtedly drive our sales line harder by taking more bad debt risk but this is a constant judgment call as entering into fixed price contract work is too in an inflationary environment. notwithstanding my comments on pricing so far and low margin transactions we are still steadily recapturing share in the general merchant which highlights that with good execution it is possible to grow share and protect profits in this market and Gavin will talk to you about that more in his section later and finally the disposal of stair crafters as Gavin outlined last year also contributes to the bridge on this slide so let me now cover the profit walk for the year And I'll start by repeating something I said at the year end, if I may. We, along with every other materials distributor in the UK, employing a large workforce and carrying a significant rent bill, need to deliver gross margin expansion to help cover the cost of doing business in the UK. This is following the past two years of higher global inflation and the increased burden of employment-related taxation. The good news is we have managed to achieve this in H1 and it has helped stabilize overall profitability. Our gross margin has improved because of a variety of factors, but I would pull out three. Firstly, we've had a relentless focus on passing through price increases and not discounting unnecessarily. Secondly, our sales mix has consciously shifted. We've been comfortable to walk away from some lower margin direct sales and instead focus on higher margin yard sales where availability and service are more important differentiators. And thirdly, we've undertaken a huge amount of work in the past 12 months doing what I would describe as good old-fashioned category management to support our COGS position, driving greater collaboration with our strategic suppliers on improved terms, harmonising purchasing terms across the group, stopping purchasing from our direct competitors and removing nearly a fifth of our tail-merchanting suppliers. Given our size and scale, we have a huge opportunity to do more here in the future as we continue to professionalise how we buy, for example how we leverage our Far East sourcing office more effectively across the group. You can see that gross margin improvement has been needed to help mitigate the impact from cost inflation presented on the next two bars. I outlined a prelims that we would expect to see around £40 million worth of cost inflation this year and around half of that is in the bar on the graph with the balance subsumed and netted off within Torstation UK. The £6 million cost reduction is a half year effect of the restructuring activity we undertook in 2025 as well as further efficiencies we have identified during this year. All business units and central functions cost centres are running favourable to budget as we look to deliver further efficiencies in the way we operate in tough market conditions. And the final bar reflects property profits and I'll come back to our property portfolio later. The next slide is the cash flow for the half and this is a continuation of the efforts of the past two years focusing on delivering further efficiencies that lie within our gift and being disciplined on cash outflows. Many of these items are in line with prior year but I'll pull out three. In working capital we've made further good progress with our suppliers in harmonising terms and driving procurement gains in the process. Debt collection remains a key focus and we've done a good job across the group but as with stock this will be a key focus for the second half and I think we can still do more here. From a capital expenditure perspective we're clear the number can and should be lower than it has been in previous years. It also needs to be targeted into different areas and types of spend. Of this year's total forecast, nearly half will go into renewing our fleet and bringing down its average age. The balance sits across investment in the Merchanting estate, specifically the older General Merchant branches, and rolling out Toolstation UK stores, which we want to accelerate towards our 650 target. Small amounts of sensible investment directed at roof repairs, yard resurfacing, colleague welfare facilities etc can make a massive difference to the customer and colleague experience and we are starting that refurbishment agenda. The group has historically spent significant sums of money relocating branches entirely. Rarely have the economics of that investment returned in line with original expectations and in this market context expensive relocations make no sense. Finally we generated 17 million pounds of net property receipts in the first half and I wanted to talk a bit more about this, how we think about this. As part of the usual housekeeping of a large branch network we have closed 10 merchanting branches in the first half. Most of these are either benchmarks or managed service specific branches or located in rural communities where regrettably the economics of extending the lease or making capital investment to refurbish these branches didn't make sense. The sale of these sites and surplus to requirements development land generated most of the group's property receipts in the first half. We may also see opportunities to realise value from the property portfolio where location is less relevant for product that is typically delivered rather than collected and where capacity levels are forcing us to look at self consolidation of our estate. what we are not looking to do to be clear is widespread sale and lease back transactions of our best sites in the best cities in the UK or even outright sales we don't need to do this to raise cash we can candidly borrow money more cheaply if we needed to and it's ultimately value destructive over the medium term when those lease breaks arise we would simply lose our prime sites and never get anything remotely comparable to them to replace them So let me just very quickly summarise how these cash actions impact the balance sheet. Net debt reduces to £543 million, with net cash before leases at £55 million. This brings our leverage net debt to adjusted EBITDA down to 1.9 times, which is back inside our desired range of 1.5 to 2 times for the first time since 2022. This fulfils a commitment we made in January 2024 to return the group to this range as soon as it was practical and sensible to do so. A listed group of our size and prominence should be deemed to be consistently investment grade when it comes to raising finance in the public markets and the future rebuild of this group requires the foundations of a strong balance sheet financed by a competitive rate of borrowing. So let me summarise before handing back to Gavin. We expect the market to remain challenging in the second half but it is possible to trade smart, take share and protect profitability and we will continue to keep a tight grip on costs and cash at all times. In terms of guidance we expect a group effective tax rate for the year of 28% on UK generated profits base capital expenditure should be between 60 to 70 million for the year and we expect property profits for the full year to be around 5 million, recognising this has already been achieved in H1. Finally, we are expecting a similar market backdrop for H2 as H1 and therefore expecting a similar trading performance. And with that, I will hand you back to Gavin.

Thanks, Duncan. Some of you will recognize this slide from the full year presentation that we gave in March when we started talking about the business in three tiers. And it feels appropriate to use this slide again just to sort of steer us through the next few slides. Just to be clear, going forward, we may not always talk about every business at every presentation, but I think today it just still feels appropriate to do that. In terms of Travis Perkins, Green and Gold, General Merchanting, obviously the biggest business that we have within the group. and even though we don't separate out the individual performance numbers for each of the businesses, what I would say is that Rich and his team in the first half of this year have delivered a mid to high single digit percentage profit improvement within green and gold. So one of our key targets in seeing traction within the green and gold business we absolutely have developed as we've gone through the first half of the year. The gross margin expansion through inflation pass-through, as Duncan's just talked about, looking at things like sales mix, looking at the way that we procure. And what I would say is, as a group, we're now set up and we're structured in a more sensible way to make this work as we go forward. Thank you very much. We have streamlined and more focused the management team within that business with everybody within green and gold reporting directly into rich. It gives us shorter management chains. It gives us more agile decision making processes and I think sets us up as a much more agile business going forward. and the start of light side procurement synergies with Toolstation UK and I appreciate some of you may look and say well Toolstation and Green and Gold have been in the business together for quite a long time surely you're beyond the start of this but I think with where we are now we're really understanding the strength and collaboration between those two businesses where they sit within the group and the benefits that we can derive from working with both tool station and with with green and gold on those light side procurement opportunities and rich and his team in green and gold lack via her team in tool station really understand the power of that collaboration I think with the general merchant business what I would say is look this isn't a silver bullet solution in terms of improving the performance of green and gold but the fact that we're seeing the profit move forward the fact that we're seeing the gross margin move forward I think this is now an accumulation of a number of different efforts across that business that gives us a lot of confidence going forward. In terms of Toolstation UK, performance remains absolutely in line with where we expect that business to be. We've now got over 900,000 Toolstation club members. Club members are important to us because actually when you look at the loyalty we get from club members, you tend to get a higher degree and share of wallet from those customers. they tend to spend more the basket size is bigger the margin is more attractive but also it gives us access to great customer data which helps us to shape the business going forward which is also very important for us going going into the future as Duncan mentioned the Far East sourcing office I think this year we're celebrating 15 years of having a Far East sourcing office within the Travis Perkins group but I think it's fair to say that all of us collectively across the group leadership team believe we haven't really made the most of that of that team we've got some really good people over there they've got some really good category plans and I think we can really start to exercise that as we move forward certainly within tool station which has got some fantastic distribution facilities that gives us the opportunity to really start to look at how we can benefit from those really good distribution facilities across different parts of the group specifically when you look at green and gold and distributing into their branches and also with tf solutions which i'll talk a little bit more about later tf solutions is a relatively small business only has 14 branches in the uk but if we can utilize the branch network of toolstation for the distribution of that product as well suddenly you've got approaching 600 distribution points as opposed to 14. The store number commitment in terms of Toolstation UK, we expect over the next three years to move that branch portfolio from 590 up towards 650. Myself, Lakvir, the team, we believe that 650 is the right medium term target to get to. That will include a few more of our Go branches. The photograph that you can see there is Toolstation Go which is in Battersea and certainly within London we think there's great opportunity for developing that go concept which has a lower number of SKUs but really focuses on the fast moving higher margin products that we have. Staying on Toolstation, just a moment on Benelux. We spoke quite a lot about Benelux when we announced the four-year results. We announced that we would carry out a strategic review. That strategic review has been completed. I think it's fair to say now that we're into discussions with a number of third parties relating the future ownership and status of Toolstation Benelux. I'm sure that you can appreciate those conversations, those discussions are confidential. they are commercially sensitive and I'm not going to get into any detail around those discussions today but as soon as it's appropriate to do so I will give you a further update on where we are with tour station Benelux In terms of BSS, obviously as many of you know a business that I know very well, I think we've got some significant opportunities in BSS and it's a really interesting business in terms of where we're seeing growth come through. The private label opportunity in BSS is real. We have a really strong private label which is called BOSS. BOSS accounts for about 10% of the turnover within BSS. Obviously with private label you tend to get a greater margin opportunity as well. with BOSS it's a technical brand so this is not a low cost kind of cheaper than everybody else product BOSS is a high quality technical brand within BSS and it's actually been the private label within BSS for over a hundred years but it's a real opportunity for us as we go forward We have got two separate distribution points within BSS, one at Magna Park near Lutterworth in Leicestershire, one at a place called Cross Point which is in Coventry and we've operated those two distribution centres quite separately. The product is very different, the vehicles are very different but we have seen opportunities for logistics cross docking there and that's certainly bringing some cost and margin benefits as we look at BSS as a business. We do see expansion opportunities going into more into the commercial, the industrial and the infrastructure sector and they are definite growth opportunities as we go forward along with driving growth in things like commercial air source heat pumps. So this is a developing and evolving business but certainly a true specialist. and expanding into collaboration with tier one contractors onto major projects. And when you look at things like prisons, what we've done here, we have an onsite facility in a secure environment that gives us exclusivity on this particular project. This is an area where BSS has got real history of proving that we can make these things work. We did it with terminal five, we did it with the Olympics stadium and we see this as a real opportunity for us going forward. in providing a unique facility for the tier one contractors who are working on those facilities. Keyline, as you know, is our civils and infrastructure business. Strong inflation in this particular product sector as we went through the first half, as Duncan mentioned, particularly on plastics where you've got oil-based pricing. And I think it's also fair to say that within Keyline, historically, it's been reliant on the residential new-build sector, and you don't need me to tell you how difficult the residential new-build sector has been. We are exploring opportunities in utilities, in infrastructure and data centres. We're seeing some early traction there, really encouraged by how we see that going forward. But particularly in this business, we do need to make sure that we keep that really disciplined focus on costs and on working capital. But I think with the team that we have in this business now, we're really well placed for the recovery. It's also important to recognise that in this business over 95% of what we sell is delivered either by ourselves or directly by the manufacturers. So I think in terms of the infrastructure within our own business we're building a lean business that we believe will be really well placed as and when we see volumes recover within this particular sector. CCF, I think we have to say that our performance in CCF has deteriorated since last year. It's another business that historically has been very highly reliant on residential new build, but we are holding market share. And as Duncan mentioned earlier, we are being quite choosy here in terms of the margin levels of business that we are prepared to accept and also paying really close attention to the credit limits and the credit viability of some of the people that we're dealing with. The slowdown in residential new build, particularly in high rise within the southeast, has been a real challenge within this business. But we have identified actions that we can take. We have decided to look at the branch network, to look at the logistics efficiencies, How we can make the supply chain work better and I think Chris and the team in CCF were all completely bought into this particular category is critical to UK construction in the long term. It's a category that we absolutely should be a major player in and we just need to make sensible business decisions and devolve the model so that we can participate in this particular sector but make better returns on this going forward. TF Solutions, our air conditioning and refrigeration business. It's fair to say market conditions have been relatively friendly towards the air conditioning business in recent weeks. In case anybody hasn't noticed, it's been relatively warm. And I think it's fair to say that right the way across TF Solutions. whether it's in the air conditioning specific or refrigeration gas installation markets all of these have been really positive as we go forward the digital catalog that i spoke about at the full year is now live and we will also be opening our first tf solutions branch within the bss business in dublin in the first half of next year and that'll be the first move of putting tf solutions into ireland it's the perfect opportunity to do it we're relocating the BSS branch in Dublin to a much better facility and absolutely lends itself to TF Solutions going into there. We do believe that the air conditioning and refrigeration climate control market has really strong potential going forward but please remember we are building from a relatively small base but I think James and his team within TF Solutions also relatively happy and probably come as no surprise that the month of July was an all-time record month for them in terms of sales of air conditioning. So I think in terms of summarizing where we are, as Duncan said, a very strong cash performance, which kind of underpins both flexibility and resilience in the market going forward. And I personally believe that a really strong balance sheet in a market that still has some uncertainty is a really strong and positive place to be. We talked at the full year about having a disciplined approach to costs, to margin and to capital allocation and we will continue to make what we believe are sensible business decisions in those areas to make sure that we retain that discipline going forward. we absolutely believe there are further opportunities for self-help there are things that we can do to improve operational efficiency there are things that we can do to drive productivity there are things that we can do to manage our supply chain better both in terms of physically managing the supply chain but also in terms of utilizing the procurement skills that we have across the group so recognizing the market being difficult we still believe there are things that we can do within Travis Perkins to make the business better to make the business stronger going forward As I mentioned in March, we put a completely new group leadership team in place, the majority of whom are in the room with us today. That team is now fully established. It's developing well. I think it's fair to say that we've got a team now that have all of the arrows pointing in the same direction. everybody understands that the part that they have to play and the part they have to play not just in managing their own specific business but also in developing the group and making the group stronger and I think our market leading positions that we have within those businesses the vast majority of which are either number one or number two in their chosen markets gives us a lot of confidence as we look forward and say, we know we're in a strong position. We know we can continue to improve the quality of the business and run the business in a better way. Although the market has its challenges, we are still operating in a large market. So there is still profitable share that we can go for. We can still build margins. We can maintain the discipline on costs. And certainly with that strength of balance sheet, I think it's fair to say we feel that we can face anything that the market's going to throw at us going forward with a lot of confidence and we can make sure that Travis Perkins continues to improve, to grow and to develop as we go forward. that concludes the presentation for this morning so we are going to move into Q&A as we have got people following on a webcast as well what I would say is if you've got a question if you could raise your hand we'll bring the microphone to you if you could give us your name and the organization you represent and then ask your question that will help us to get through the Q&A without too much mayhem breaking out within the room so if we come right down to the front to start with with Charlie down on the front row that'll give me time to get Charlie Cabot, Steve Hall