Travis Perkinsplc: Full year results for the year to 31 December 2023
Source: EQS
Dissemination of a Regulatory Announcement that contains inside information according to REGULATION (EU) No 596/2014 (MAR)
A challenging year in weak market conditions; driving actions to support profit recovery and enhance cash generation Protecting market position in challenging conditions
Transforming the operating model to build a stronger business
Enhancing cash generation to support future capital allocation
(1) Alternative performance measures are used to describe the Group’s performance. Details of calculations can be found in the notes listed.
“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 https://travis-perkins-2023-full-year-results.open-exchange.net/ Enquiries:
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 (b) neither This announcement is current as of Past performance of the shares of Summary2023 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 PerformanceThe Group delivered revenue of Adjusted operating profit of Although the Group delivered overhead savings in 2023 of around Transformation of the Group’s operating modelGiven 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 The next phase commenced in In Work to deliver further structural efficiencies will continue over the medium term and be focused on the following areas:
Adjusting items
There were
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 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 returnsThe 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 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:
Taking into account all of these factors, for 2023 the Board is recommending a final dividend of The commitment to lowering leverage will result in a planned reduction in capital expenditure to OutlookA recovery in the 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 Technical guidanceThe Group’s technical guidance for 2024 is as follows:
Segmental performanceMerchanting
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 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 The private domestic new-build market, primarily serviced by Keyline, CCF and 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 Toolstation
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 In September the Toolstation https://www.travisperkinsplc.co.uk/investors/results-reports-and-presentations/?year=2023
Toolstation France delivered sales growth of 29% in the year but losses increased to
Despite some positive progress in the past year, the business in
Taking these factors into consideration, and with forecast losses expected to increase to
Benelux
Although sales grew by 11%, performance overall in Benelux in 2023 was significantly below management expectations with a loss of
Management expects losses to narrow to around PropertyThe Group generated property profits of The Group continued with its policy of reinvesting freehold sale proceeds with the purchase of a 6.25 acre industrial site in Selsdon, near Building for the futureThe Group made good progress towards its ambitious carbon reduction targets, as detailed below:
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 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 Financial PerformanceRevenue analysisThe 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 Volume, price and mix analysis
Quarterly revenue analysis
Operating profit
Finance chargeNet finance charges were in line with prior year at TaxationThe tax charge before adjusting items was The statutory tax charge for 2023 was Earnings per shareThe Group reported a total profit after tax of Adjusted profit after tax was
Cash flow and balance sheetFree cash flow
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
Base capital expenditure in cash terms was in line with prior year and below the Group’s medium-term guidance (of Strategic capex was Maintenance capex increased by
Uses of free cash flow
Cash and cash equivalents reduced by In 2022, the Group repurchased Net debt and funding
Note - All covenant metrics measured post IFRS16 Overall net debt increased by FundingAs at
As at
The Group’s credit rating from Fitch Ratings was affirmed at BBB-, albeit on negative watch, following a review in
Principal risks and uncertaintiesMaintaining 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
Consolidated income statement
For the year ended
Total profit for the year is all attributable to the owners of the Company.
Earnings per ordinary share:
The accompanying notes form an integral part of these financial statements.
Consolidated statement of comprehensive incomeFor the year ended
All other comprehensive income is attributable to the owners of the Company.
Consolidated balance sheetAs at
Consolidated statement of changes in equity
For the year ended
Consolidated cash flow statementFor the year ended
Notes
6. Revenue reconciliation and like-for like sales
Like-for-like sales are a measure of underlying sales performance for two successive periods. Branches and stores contribute to like-for-like sales once they have been trading for more than 12 months. Revenue included in like-for-like is for the equivalent times in both years being compared, including changes to the number of trading days. When branches close, revenue is excluded from the prior year figures for the months equivalent to the post-closure period in the current year. 7. Profita. Operating profit
There are no gains or losses on the disposal of property, plant and equipment except for the profit on disposal of properties of b. Adjusted profit
Adjusted profit excludes adjusting items and amortisation of acquired intangible assets.
8. Adjusting items
Restructuring As part of the Group’s strategy of simplifying how its businesses interact with each other and in response to the continued weakness in the construction market, the Group has commenced the restructuring of distribution, administrative and sales functions. The first steps in this programme were completed in 2023 with associated costs as follows:
Benchmarx branch closures A charge of Toolstation France impairment Following a change in strategy, a charge of 9. Business segmentsThe operating segments are identified on the basis of internal reports about components of the Group that are regularly reviewed by the Chief Operating Decision Maker (“CODM”), which is considered to be the Board, to assess performance and allocate capital.
Segment result represents the result of each segment without allocation of certain central costs, finance costs and tax. Adjusted segment result is the result of each segment before adjusting items, the amortisation of acquired intangible assets and property profits. Unallocated segment assets and liabilities comprise financial instruments, current and deferred tax, cash, borrowings and pension scheme assets and liabilities.
Both operating segments sell building materials to a wide range of customers, none of which are dominant, and operate almost exclusively in the
10. Net finance costs
11. Tax
12. Pension schemes
13. DividendsAmounts were recognised in the financial statements as distributions to equity shareholders as follows:
The Directors are recommending a final dividend of 5.5p in respect of the year ended 14. Earnings per sharea. Basic and diluted earnings per share
A total of 620,310 share options (2022: 528,262 share options) had an exercise price in excess of the average market value of the shares during the year. As a result, these share options were excluded from the calculation of diluted earnings per share.
b. Adjusted earnings per shareAdjusted earnings per share is calculated by excluding the effect of adjusting items and amortisation of acquired intangible assets from earnings.
15. Net debt
16. Cash flow metricsa. Free cash flow
b. Cash conversion
17. Return on capital employedGroup return on capital employed is calculated as follows:
Group return on capital employed is calculated as follows:
18. Net debt to adjusted EBITDA
Dissemination of a Regulatory Announcement, transmitted by EQS Group. The issuer is solely responsible for the content of this announcement. |
ISIN: | GB00BK9RKT01 |
Category Code: | ACS |
TIDM: | TPK |
LEI Code: | 2138001I27OUBAF22K83 |
OAM Categories: | 1.1. Annual financial and audit reports |
Sequence No.: | 307532 |
EQS News ID: | 1851099 |
End of Announcement |
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