Travis Perkins has released its half year results for the six months ended 30 June 2021.
The report shows like for like revenue growing by 44.1% (to £2.2 billion) with adjusted operating profit of £164 million (2020: £17 million) which is 14.5% ahead of 2019. This is attributed to higher volumes of sales with solid gross margins, improved customer proposition, and the benefits of restructuring the business. As a result, the company has reviewed its profit forecast for the whole of 2021 to at least £310 million.
Following the demerger of Wickes and the sale of the Plumbing & Heating business, the Merchanting businesses delivered a strong first half performance, particularly the Travis Perkins General Merchant, underpinned by the strong recovery in domestic RMI demand. Overall Merchanting revenue was up 37.5% versus H1 2020 (£1.9 billion v £1.3 billion), where enforced closures due to the pandemic significantly affected trading, and 1.9% ahead of H1 2019. Factoring in the 2020 branch closure programme, like-for-like revenue growth was 47.3% and 11.0% up when compared to 2019.This means an adjusted operating profit of £156 million, up 11% versus 2019, and an operating margin of 8.2%.
Price inflation accelerated through the first half of the year, with prices increasing by around 4%, Q1 being around 2% compared to Q2 at around 7%. The businness expects inflationary pressure to persist in the near term with materials shortages on some key product lines, most notably in raw materials such as timber and plasterboard related products.
The Group sees its end markets as remaining resilient, despite high levels of uncertainty across the economy as a whole, and the Group's businesses are deemed to have responded well to the challenging market dynamics over the past six months.
Toolstation doubled its operating profit so far (to £20 million) and has achieved total revenue growth of 38.7% (£394 million v £284 million in 2020) with further market share gains, which means the Group plans to continue the branch network expansion in both the UK and Europe. In the UK, 30 branches were opened in the first half and at least 60 new branches will be added during 2021.
The specialist businesses are also reported as recovering well, with BSS in particular well-placed to take advantage of strong demand in the commercial RMI market.
Keyline is starting to see momentum build as the refreshed management team's work start to bear fruit. The infrastructure market is strong and new housing is beginning to recover with Keyline the beneficiary of being "first on site" as new housing starts gradually pick up.
CCF's marketplace remains challenging as the "late cycle" trades, specifically new housing and commercial, continue to lag, and product availability remains an issue with several core products on restricted supply.
Customer Apps are being rolled out, starting with Toolstation and the General Merchant, and the delivery management system has been fully implemented across CCF and Keyline as well as around half of the General Merchant network.
Meanwhile the Group is also focused on identifying emerging opportunities, such as TF Solutions, the Group's air conditioning and refrigeration distributor, where network capacity has been doubled in the last twelve months.
The Group has set out the framework to achieve an ambition of leading the industry in sustainability. As part of that framework, on 12 July 2021, it announced a commitment to a new 1.5 degree-aligned carbon reduction target by 2035, consistent with the 1.5 degree pathway of the 2016 Paris Agreement to limit global warming.
Regarding the decarbonisation of the Group's fleet, this target will involve an 80% reduction and a net zero commitment to offset any remaining carbon by 2035. In practical terms, to support the delivery of these goals, the Group welcomed its first fully electric HGV into CCF in March, with more such vehicles in the pipeline. All of the Group's LPG forklift trucks will also be replaced by electric equivalents.
The Group has also set a target for a 63% carbon reduction in the Group's supply chain emissions by that year. This primarily apply to the purchasing of goods and services; concrete products, bricks and plasterboard in particular, and the in-use emissions of goods sold; especially gas heating and power tools.
In addition to the high level of focus on the Group's environmental impact, effort is being invested in building a more diverse and inclusive workforce. To that end, the Group has enrolled over 850 new and existing colleagues onto an apprenticeship programme, remaining on track to reach the goal of 1,000 apprentices by the end of 2021. Of those on the programme, over 95% are under the age of 25, around one third are female, and around half are from a minority ethnic background.
The Group has also taken on just over 350 colleagues under the Government's "Kickstart" scheme to support young people who are currently on Universal Credit and at risk of long-term unemployment. Of those, just under 10% already have a permanent position within the Group and initial indications are that this could become as high as 70%.
Commenting on the company's half year results, Nick Roberts, Chief Executive Officer, said: "I am delighted with our performance during the first half of 2021. To have executed our planned strategic portfolio actions whilst delivering an excellent trading performance in ever changing market conditions is testament to the hard work and capability of our colleagues across the Group.
I am particularly pleased with the agility that our teams have shown in responding to rapidly evolving market dynamics whilst always maintaining their focus on customer, colleague and supplier safety.
This has been particularly noticeable in the Travis Perkins General Merchant where decisive actions taken during the previous two years have enabled us to respond rapidly to customer needs at a local level. Toolstation UK, meanwhile, is on course to deliver another excellent year of growth and our European rollout continues to gather pace.
Our businesses have continued to play a critical role in the construction sector's ongoing recovery and, while some uncertainty still remains, the end markets for our trade-focused businesses remain robust.
As a result, I am cautiously optimistic around the outlook for the business and confident in our ability to make further progress in the second half of the year. We look forward to updating shareholders on our future plans in September."
