In its full year results announcement for 2023, Travis Perkins plc has cited “a challenging year (with) weak market conditions” with Group revenue (2.7)% lower than the year before.
Within the report and the accompanying summary results presentation, the business notes that it is “driving actions to support profit recovery and enhance cash generation” whilst “protecting (its) market position in challenging conditions” as a progressive downturn in both new build housing and the private domestic RMI market has led to a fall in Group revenue.
In addition, a “combination of lower volumes, overhead cost inflation and rapid commodity price deflation in H2” have resulted in full year adjusted operating profit of £180m (2022: £295m).
The report states that the company has “invested to protect and build market positions with market share gains in both Toolstation and Travis Perkins General Merchant.” Furthermore, it is said to be “transforming the operating model to build a stronger business.”
Anticipating further challenging conditions in 2024, this is said to have included a “step change reduction in non-branch cost base, delivered with £35m annualised savings” in the first phase, in part through a “reduction in central / regional headcount”, whilst also “delivering profit enhancements through the simplification of Group structures, lowering supply chain costs and harnessing benefits from new technology.”
For example, the Group says it is optimising its Benchmarx branch network (39 standalone branches closed in February 2024 as part of an ongoing strategy review) with a focus on an “integrated offer within destination General Merchant branches and profitable standalones.” In addition, it is pursuing the “continued rationalisation” of its legacy Toolstation UK supply chain, following the successful opening of its new Pineham distribution centre.
Total Group Revenue was £4,862m (2022: £4,995m). In its Merchanting division (encompassing the Travis Perkins General Merchant business, BSS, Keyline Civils Specialist and CCF), Revenue was £4,036m (2022: £4,220m). The majority of profit decline (2023: £212m / 2022: £314m) was said to result from a loss of volume and the impact of H2 price deflation on gross margin %. However, “good progress” was made on value-added services, with Hire up 6% and Managed Services up 5%.
Toolstation, meanwhile, recorded Revenue of £826m (2022: £775m) to register like-for-like growth of 4.o%.
As previously noted, overall Group operating profit was £110m (2022: £285m).
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.”
Nick continued: “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.”
For more detail, click here to see the Travis Perkins plc 2023 Full Year Results Presentation.
