Travis Perkins: Group Revenue Drops By 4.7%; Growth At Toolstation

Travis Perkins plc, the UK’s largest distributor of building materials, announces its full year results for the year to 31 December 2024 

A challenging trading year

• Group revenue down (4.7)% driven by price deflation, continued decline in market volumes and underperformance in the Merchanting segment
  
  
• Significantly improved cost discipline but lower trading volumes and price deflation resulted in full year adjusted operating profit of £152m (2023: £198m)
  
  
• Operating profit of £2m (2023: £161m) reflects trading performance and adjusting items of £139m (of which around £20m are cash items) related to impairments in Staircraft and certain Merchanting branches and restructuring actions

Good progress in Toolstation

• Toolstation UK adjusted operating profit up 48% driven by robust sales growth, improved gross margins and supply chain and overhead efficiencies
  
  
• Toolstation France closed and Toolstation Benelux on accelerated path to profitability

Strong focus on cash generation and strengthening the balance sheet

• Net debt before leases reduced by £123m driven by £64m benefit from improved stock management and disciplined approach to capital expenditure
  
  
• £125m raised from investment grade US private placement notes in March 2025

(1) Alternative performance measures are used to describe the Group’s performance. Details of calculations can be found in the notes listed.

(2) For continuing businesses only. The Toolstation France business is treated as a discontinued operation. 

On 10 March 2025, Pete Redfern resigned as Chief Executive Officer as a result of ill health. The Nominations Committee has commenced a search to identify the right long term successor to Pete as CEO. Geoff Drabble, Chair of Travis Perkins, will work with the management team during the interim period to progress actions already underway to improve performance.

Geoff Drabble, Chair, commented:

“Since joining the Board of Travis Perkins, I have been encouraged by the breadth and depth of our market footprint, the quality and commitment of our people and the strength of our relationships within the construction industry.

However, it is clear to the management team that there are a number of areas where the business needs to refocus and change the way it operates in order to better serve our customers and effectively support our suppliers. Several initial steps have been taken under Pete Redfern’s leadership to begin rebuilding trust and confidence, both internally and externally, with focused leadership roles restored in all our businesses and actions taken to re-engage and motivate our teams. These changes will make our businesses more responsive and bring them closer to our customers. Following Pete’s resignation, the priority is to ensure this work continues at pace, whilst the Nominations Committee of the Board identifies the right long-term successor.

Whilst uncertainty remains regarding the strength and timing of a recovery in UK construction activity, with more resources re-deployed into customer-facing roles, the Group is now better placed to benefit from returning demand. This will be supported by disciplined capital allocation, focused on upgrading and protecting our core competitive advantages, and a clear customer-focused strategy owned by the leaders of the business. I am confident that this approach will provide attractive returns for shareholders over the medium-term." 

2024 performance

2024 was a challenging year for the Group with revenue of £4,607m down (4.7)% year-on-year, driven by the Merchanting segment through a combination of price deflation, reduced demand across the UK construction market and increased competitive intensity. Toolstation continued to make good progress with robust revenue growth in both the UK and Benelux reflecting ongoing maturity benefits.

Adjusted operating profit excluding property profits of £141m was £(42)m, or (23)%, lower than prior year. Around £(39)m of the profit decline resulted from lower sales volumes whilst approximately £(56)m was attributable to lower gross margins, driven by price deflation and increased competitive intensity.

Against this backdrop management took actions to reduce total overheads by £53m compared to prior year. Restructuring actions taken at the end of 2023 reduced overheads by £35m with a further £36m of savings on discretionary spend and £9m savings from the strategic review actions taken in Toolstation Benelux. Offset against this was around £(27)m of overhead inflation, primarily on payroll and property costs. 

Rebuilding the business 

Building on the Group’s inherent strengths

The Group has strong fundamentals built up over decades as the largest UK building materials distributor, namely: 

• A comprehensive UK network backed by freehold ownership of key trading sites
• Experienced and high-quality teams across the business
• Long-established customer and supplier relationships
• A unique portfolio of brands
• Significant earnings growth potential from Toolstation as the business matures

Attractive long-term structural drivers 

The Group operates in a market with attractive long-term structural drivers - in particular a shortage of UK housing, an ageing UK housing stock and a need to decarbonise the UK’s built environment. These structural drivers have taken greater prominence in the key priorities and policy setting of the new Labour Government, which has set ambitious housebuilding targets and see construction-led activity as a major pillar to kickstarting economic growth. 

However, the Group has become distracted in a challenging market

The Group’s key end markets have seen a progressive deterioration in demand over the past three years driven by high inflation, rising interest rates and weak consumer confidence. During this period, the Group’s approach to capital allocation and overhead management has diluted returns, exacerbated profit decline and resulted in leverage increasing beyond the Group’s target range. During this period, the business has seen significant personnel change at all levels of the business, particularly in some key customer-facing roles.

Building an entrepreneurial, customer-centric business

Over recent years, the Group has become too centralised which has increased costs and complexity. Work is now underway to transform the operating model to create a business based around empowered local branches, backed by high quality support functions providing insight and driving the benefits of national scale. This cultural shift will bring the business closer to its customers and enhance service levels. 

Balance sheet

The Group has made good progress on actions to strengthen the balance sheet during the year, with overall net debt reducing by £77m and net debt before leases reducing by £123m. Accordingly, despite the further reduction in adjusted operating profit, net debt / adjusted EBITDA has also reduced to 2.5x. Management remain focused on returning leverage to the Group’s target range of 1.5 - 2.0x as soon as is practically possible.

Dividend

The Board is recommending a final dividend of 9.0 pence per share (2023: 5.5 pence per share) to give a full-year dividend of 14.5 pence per share (2023: 18.0 pence per share), in line with the Group’s policy to pay a dividend of 30-40% of adjusted earnings. The dividend will be paid on 29 May 2025 to shareholders on the register as at close of business on 22 April 2025.

Current trading and outlook

The Group has experienced a mixed start to 2025. Trading conditions have continued to be challenging in our Merchanting businesses with pricing now stabilised but volumes in modest decline. By contrast, Toolstation has started the year more positively and continues to deliver good growth.

It is encouraging to see a more robust demand backdrop for some elements of the construction market. However, the pace and rate of an overall recovery in construction activity levels remains uncertain and will likely need further cuts to interest rates and an uplift to consumer confidence levels to stimulate a meaningful increase in demand.

In recognition of this backdrop and the operational turnaround challenges the Group currently faces, the Board expects FY25 adjusted operating profit excluding property profits to be broadly in line with FY24 (excluding property profits).

The Board remains confident in the inherent strengths of the Group and its market-leading position in the building materials sector. By investing in its core competitive advantages with a clear focus on its customers' needs, the Group will start to deliver an improved financial performance and create attractive returns for shareholders over the medium-term.

Segmental performance

Merchanting 

Note - all figures above exclude property profits

The Group’s Merchanting businesses saw revenue fall by (6.2)% in the year as a result of price deflation and declining volumes, arising from the depressed levels of UK construction activity and an intensely competitive backdrop. Adjusted operating profit reduced by (29.7)% to £149m, reflecting the high operational gearing of these businesses. Operating profit declined to £20m from £199m due to these factors and adjusting items of £133m relating to impairments in Staircraft and certain Merchanting branches and restructuring actions.

Price deflation, a significant factor in H1 due to the rollover of prior year timber price reductions in particular, eased in H2. However, volumes worsened as the year progressed, in part driven by project postponements caused by general election uncertainty and the delayed government budget.

The private domestic RMI market, the Merchanting segment's largest end market which is primarily serviced by the Group’s General Merchant business, remained depressed throughout the year. The private domestic new-build market, primarily serviced by Keyline and CCF working with national and regional housebuilders, also saw another notable drop in activity.

The Merchanting segment’s other end markets – commercial, industrial and public sector – saw mixed levels of demand with uncertainty surrounding government departmental budgets persisting until after the late October budget announcement. This created hesitancy to invest and impacted demand in the second half of the year, particularly in BSS which serves these markets.

Six new Merchant branches were opened during the year as the Group continues to selectively add new branches to its network. Five of the sites were new General Merchant branches, serving major conurbations including Leeds, Edinburgh, Derby and Coventry, with a new CCF branch also opened in Norwich.

51 Merchant branches were closed during the year with the majority being 42 Benchmarx standalone branches. The Benchmarx decision continues the Group’s strategy of offering an integrated proposition within destination General Merchant branches. The remaining nine branches closed comprised eight General Merchant branches and Keyline Kirby with these sites deemed to be poorly located or requiring significant investment and where trade could be transferred to an alternative nearby branch.

Toolstation 

Note - all figures above exclude property profits and are for continuing businesses only. The Toolstation France business is treated as a discontinued operation.

UK

Toolstation UK continued to make good progress during the year with revenue increasing by 2%, reflecting continued maturity benefits and a modest pricing uplift. A net 17 stores were added during the year with 19 new stores, three relocations and two closures. A similar number of store additions is expected for 2025.

Adjusted operating profit increased by £11m (47.8%) year-on-year driven by a combination of sales growth, gross margin benefits from improved purchasing and product mix and supply chain efficiencies. 

Benelux 

Like-for-like sales in Benelux increased by 11% as the business continues to mature. However, due to rapid growth over recent years, the business has not been effective in converting strong sales growth into improved profitability and hence management conducted a full strategic review of the business during the first half of the year. 

The review concluded that the business had good long-term prospects but needed to take near-term actions to accelerate the path to profitability. These actions included the closure of 11 underperforming branches, a 15% reduction in central headcount, improving procurement capability and optimising supply chain capacity. As a result of these actions, adjusted operating losses reduced to £(13)m and are expected to narrow significantly again in 2025. 

France 

Following a strategic review early in the year, management concluded that Toolstation France did not have a credible pathway to becoming a profitable standalone business. The capital requirements to reach the necessary scale in the French market, given the operation’s relative immaturity, and the differing customer behaviours to Benelux and the UK, led management to pursue divestment options with established domestic partners in the French market. When it became clear that there was no overall buyer, management took the difficult decision to close the French business. That process is now complete with 8 stores having been sold to Quincaillerie Angles as a going concern and the 43 remaining stores, alongside supply chain and head office functions, closed by the end of 2024.

Financial Performance

Source : Travis Perkins plc

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