19 branches in Travis Perkins' General Merchant and Benchmarx brands were closed in 2022, slashing headcount by 400 for Travis Perkins plc.
Expected to save the group - which is closely tied to the construction market - £25 million in 2023, the Q4 2022 move cost £15 million and was partly in anticipation of lower levels of activity in the UK construction sector in the year ahead. The group also said it was an acceleration of its plans to modernise the business by closing smaller branches and continuing to invest in larger, more capable, destination branches incorporating ‘value-added’ services such as the increasing import Hire segment and kitchen showrooms.
Toolstation, also owned by the group, saw a return to good growth in H2 after tough prior year comparables in H1. Significant investment was made expanding infrastructure in the UK and Europe for the brand.
Overall, Travis Perkins plc saw robust revenue growth of 8.9% and adjusted operating profit of £295 million, impacted largely by lower year-on-year property profits and that aforementioned £15 million restructuring charge in Q4.
Nick Roberts, Chief Executive Officer, commented: “The Group delivered a resilient trading performance in 2022 which is testament to the capability of our colleagues and the strength of our market leading propositions. I would like to thank our teams for their hard work throughout the year and their flexibility to meet customer needs amidst rapidly changing market dynamics.
"In the second half of the year we made some difficult decisions in response to the weaker trading environment and we continue to be watchful of market trends, working closely with our customers and suppliers to stay on the front foot. Investment continues in our strategic growth programmes including selectively exploring new destination branches for the Travis Perkins General Merchant, rolling out Toolstation in both the UK and Europe and investing in growing our value-added services, notably Hire, Benchmarx kitchens and our Staircraft business, always being mindful to flex the pace of the programme to reflect market conditions.
"Whilst it is early in the year and macroeconomic uncertainty remains, the combination of our diverse end market exposure, appropriate cost actions and further market share gains driven by continued strategy execution, will enable the Group to deliver another resilient trading performance in the year ahead.
"As a market-leading distributor of building materials products, we continue to benefit from long-term strategic growth drivers in our markets including new environmental and safety legislation and commitments from both public and private sector customers to deliver against net zero targets. We are committed to being at the forefront of both decarbonising the construction industry alongside developing the next generation of talent to create value for all of our stakeholders.”
The financial statement said: "Management is mindful of the current macroeconomic uncertainty and, in line with industry forecasts, is planning for a decline in overall market volumes in the mid to high single digit range in 2023. This will vary across end markets with private domestic new-build and RMI more challenged while the commercial, industrial and public sectors are expected to remain more resilient.
"Product cost inflation is expected to moderate into 2023 although Management does not currently expect to see any notable deflation in manufactured products. Management therefore expects to see mid to high single digit percentage product cost inflation overall driven by the rollover of prior year increases and further new increases already announced so far this year.
"Whilst the expected market dynamics point to a challenging year ahead, Management continues to anticipate delivering a performance in line with market expectations. The actions taken to create a more agile business, with broad end market exposure, enable management to remain confident in the Group's ability to outperform its markets and deliver attractive returns to shareholders over the medium term."
Toolstation in UK & Europe expansion
Toolstation branch growth saw another 33 added to the UK network, to total 563. Reflecting macroeconomic conditions, the pace of rollout was slowed and this will continue into 2023, with 'only' 10 new branches planned to open. Having opened 268 new branches since 2017, only around half of the network is classed as mature and, with new branches continuing to perform at least in line with mature cohorts, these branches have the potential to add over £300m of revenue over the next five years, said the group.
The Group has invested £28m to date (£17m in 2022) in a new c. 500,000 square foot distribution centre in Pineham, Northamptonshire which incorporates automation technology and will initially provide the capability to fulfil direct to customer orders. The facility is due to be fully operational by the second half of 2023 and is an important strategic investment both to support revenue growth and increase operational efficiency.
The European business saw very similar dynamics in terms of both revenue and operating profit performance. Benelux continues to progress and, with 27 further branches added to take the total to 113, is approaching the “critical mass” required to take the business into profitability. During the year the Group also invested in a second distribution facility in the Netherlands with around 200,000 square feet of capacity which will provide the capability to build the network out to around 250 branches. In France, where sales grew by 50%, 8 new branches were added to take the total to 45 as the business continues to refine the customer service proposition alongside optimising the choice of location and local market plans.
With the European business investing for the future and also experiencing similar volume dynamics as the UK, losses for the year were £30m. A similar outcome is expected in 2023 although this will reflect narrowing losses in the Netherlands and the impact of increased investment in France and Belgium.