Travis Perkins has released its unaudited full year results for the year to 31 December 2023, showing profits down by nearly 40%.
The report shows that the group revenue was down 2.7% to £4,8 billion, compared to 2022. Travis Perksin sees this decline in revenue as driven by the Merchanting businesses, with rising interest rates leading to a significant reduction in new build housing activity.
A lack of secondary housing transactions, coupled with weak consumer confidence and pressure on household finances, resulted in the domestic RMI market also remaining subdued. Toolstation saw good revenue growth in both the UK and Europe with maturity benefits being realised and further market share gains.
As a result, adjusted operating profit was 39.0% (£115 million) lower than in 2022 (down to £180 million from £295 million) with the prior year reported adjusted operating profit also including a £15 million restructuring charge.
A decline in profit of around £64 million is attributed to lower sales volumes, while a loss of approximately £24 million is explained to lower gross margins, with deflation on timber products in the second half a significant contributory factor.
Although the Group delivered overhead savings in 2023 of around £35 million, the remaining profit reduction was due to these savings being more than offset by overhead increases. The majority of these increases related to inflation, primarily on salaries, and included an £8 million cost-of-living payment in January 2023.
The increase in overheads also included a £20 million investment in Toolstation, primarily in the new distribution centres at Pineham (UK) and Rotterdam (Netherlands and Belgium) plus the ongoing expansion of the European network.
As result of those difficulties, and because of uncertainty as to the timing and speed of recovery, the group has initiated a restructuring of its operating model.
The first phase of this review, completed in the fourth quarter, is expected to deliver cost savings of around £35 million in 2024, primarily from a reduction in central and regional headcount and the closure of the Toolstation Bridgwater distribution centre.
The next phase was launched in February 2024 with the closure of 39 standalone Benchmarx branches, as part of a review of the strategy of the business. The focus is now on optimising the profitability of the remaining standalone branches and growing the network through integrated solutions in new General Merchant branches, which provide a lower cost model with a convenient customer journey.
In March 2024 the Group announced the proposed closure of the Toolstation Daventry distribution centre which represents the next stage of supply chain consolidation within Toolstation UK.
Work to deliver further structural efficiencies will continue over the medium term and be focused on the following areas:
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.
“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.”
