- Revenue: Down 4.4% to GBP2.36 billion.
- Adjusted Operating Profit: GBP75 million.
- Adjusted Earnings Per Share (EPS): 15.9p.
- Net Debt Before Leases: Reduced by GBP81 million in the first half.
- Leverage: Lease-adjusted net debt to adjusted EBITDA at 2.7 times.
- Interim Dividend: 5.5p per share.
- Toolstation UK Operating Margin: Expanded by 130 basis points.
- Toolstation France: Expected GBP16 million loss to be removed from P&L next year.
- Merchanting Segment Revenue: Down 5.8%.
- Merchanting Segment Adjusted Operating Profit: Down 30% to GBP91 million.
- Toolstation UK Sales Growth: 2.4% in the first half.
- Toolstation UK Like-for-Like Sales Growth: 0.7%.
- Toolstation UK Adjusted Operating Profit: GBP14 million.
- Toolstation Benelux: Closed eight branches.
- Capital Expenditure: On track to spend GBP80 million for the full year.
- Working Capital Contribution: GBP54 million, with nearly GBP60 million less stock than at year-end.
- One-off Items: GBP32.2 million recorded in the first half.
- Supply Chain Consolidation Charge: GBP15 million.
- Restructuring Charge: GBP8.9 million.
- Benchmarx Closure Charge: GBP5.7 million.
- Toolstation France Exit Costs: GBP20 million to GBP25 million expected across FY24 and FY25.
- Full-Year Adjusted Operating Profit Guidance: Around GBP150 million.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Travis Perkins PLC (TPRKY, Financial) reduced overheads by GBP19 million compared to the prior year.
- The company delivered a strong cash inflow, reducing net debt before leases by GBP81 million in the first half.
- Toolstation UK expanded its operating margin by 130 basis points.
- The strategic review of Toolstation Benelux is expected to deliver a breakeven performance next year.
- The company declared an interim dividend of 5.5p per share, reflecting a policy to pay 30% to 40% of adjusted earnings.
Negative Points
- Revenue for the first half was down 4.4%, translating to GBP2.36 billion.
- Adjusted operating profit for the half decreased to GBP75 million.
- Leverage increased to 2.7 times from 2.1 times last year due to further deterioration in profitability.
- The company expects tough trading conditions to continue in the second half of the year.
- The closure of Toolstation France will incur cash outflows of around GBP20 million to GBP25 million.
Q & A Highlights
Q: Will Jones, Redburn Atlantic. Could you explain the second quarter like-for-like performance in merchanting, which was roughly minus 8% from minus 4% in the first quarter? What factors contributed to this decline?
A: Nick Roberts, CEO. The strategy hasn't changed; we have maintained and slightly grown our market share. The competitive environment remains intense, but we continue to perform better than our competitors. Duncan Cooper, CFO, added that the volume environment has remained weak due to factors like poor weather, public project delays, and general consumer hesitancy.
Q: Annelies Vermeulen, Morgan Stanley. Regarding public sector work, do you have visibility on when it will pick up post-election? Also, have you noticed any change in tone from large housebuilding clients following the election outcome?
A: Nick Roberts, CEO. Public sector projects are still in the pipeline and need to be completed. We have taken a realistic view on what will happen in the second half. Duncan Cooper, CFO, noted that while there is positive sentiment, the pace of recovery will be gradual.
Q: Marcus Cole, UBS. How quickly do you think you can delever to the target range given the cash actions you're taking? Also, could inventory management and cost-cutting constrain the group's ability to take advantage of a volume recovery?
A: Duncan Cooper, CFO. We should delever by the end of this year compared to last. The balance sheet does not keep me awake at night but excites me for improvement opportunities. On inventory management, we are moving to more modern, dynamic infrastructure assets, which should provide greater flexibility and agility.
Q: Ami Galla, Citi. Could you provide more color on overhead inflation, gross margin at Toolstation, and the lightside collaboration?
A: Duncan Cooper, CFO. Overhead inflation includes payroll and property costs. Toolstation's gross margin benefits from increased private label penetration and optimized pricing. Nick Roberts, CEO, added that the lightside harmonization involves rationalizing and harmonizing ranges for better procurement and operational efficiencies.
Q: Charlie Campbell, Stifel. Why are property profits subdued this year, and will they return to normal levels in the future?
A: Duncan Cooper, CFO. The subdued property profits are a function of the market and our property strategy. We are not taking any dysfunctional decisions with our property portfolio. There are opportunities for mixed-use development activities in the future.
Q: Benjamin Wild, Deutsche Bank. Can you discuss the basis for the branch closures and their impact on full-year adjusted operating profit? Also, what is the status of the Toolstation Benelux business review?
A: Nick Roberts, CEO. The branch closures were part of a multiyear renewal and investment plan. The closures were of smaller, challenged branches, and we have plans to open or upgrade adjacent branches. On Benelux, strategic changes have been made to optimize the business, and we are focused on achieving breakeven in FY25.
Q: Shane Carberry, Goodbody. How does the simplification impact branch managers? Does it make them more efficient or take away their power?
A: Nick Roberts, CEO. The simplification, including the introduction of Oracle financials, standardizes processes and makes life easier for branch teams. It enables them to focus on customers and operational decisions, providing better data and reducing friction.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
