Travis Perkins has released its half year results for the six months ended 30 June 2022.

The report boasts a "good first half performance" for the company, thanks to a rise in revenue of 10.3% to £2,535 million, with adjusted operating profit of £163 million, down 0.6% on last year. 

This is in the context of a strong comparator period, which included a rapid recovery of the domestic RMI market from March 2021 onward, and high levels of DIY activity through the first half of 2021.

Adjusted operating profit for continuing businesses was £19 million higher than H1 2019, the year immediately preceding the pandemic.

Following rapidly increasing inflation throughout the second half of 2021, the Group’s businesses have reportedly successfully managed further significant materials cost price increases in H1 2022, as well as inflationary pressures on overheads.

The rise in the group's overall revenue comes despite a 4.6% reduction of revenue from Toolstation (to £376 million) due to a slow down of DIY sales post-pandemic. The company's customer base has returned to its core trade customers during the period since the lifting of key pandemic restrictions in May 2021. As a result, the UK business saw sales down 6% in H1 with like-for-like sales down 11%.

With the cost base reflecting investment in the long term growth plan, specifically with 140 net new branches opened in the UK in the last 24 months, and significant increases in salary and utility costs, Toolstation's UK adjusted operating profit in H1 shrunk 65% to £7 million (from £20 million in 2021).

While this financial performance was below management’s expectations, the long term growth potential for Toolstation remains exciting. In the UK, 20 branches were opened in the first half, with one “implant” closed. A similar number of new branch openings is expected in the second half of the year with the medium-term rollout plan to reach a network of 650 branches remaining on track.

Meanwhile, the company's merchanting section overall saw revenue growth of 13.3%, and adjusted operating profit growth of 9.0% to £170 million.

Price inflation has remained consistently high throughout the first half at 15.3% and has been a larger component of sales growth than originally forecast. Whilst in the first half of 2021 inflation was driven by product shortages, supply chains and stock levels have largely normalised and the current wave of inflation is predominantly driven by rising energy costs being passed through from manufacturers.

Travis Perkins General Merchant outperformed the market during the first half with revenue growth of 12.2%. 

The group's specialist businesses, which represent almost 40% of segmental revenue, continue to trade well with total sales growth of 15.1% across the combined businesses.

Keyline continues to make progress in its core civils, groundworks and infrastructure markets. The competitive advantage created by nationwide coverage, an extensive product range and a leading fulfilment capability is being enhanced by investment in technical and sustainability services that will further differentiate the customer proposition.

A new branch was opened in Birmingham during the first half to support the growing number of major rail and infrastructure projects in the region over the coming years including HS2 and the Midland Metro extension.

CCF delivered a strong start to the year, following supply chain challenges in 2021. High levels of inflation, notably on plasterboard and insulation, were managed adeptly, supported by healthy demand across the commercial and housebuilding sectors.

The business continues to extend its network with the recent relocation and expansion of the Edinburgh branch, and to develop its service proposition, most notably through an enhanced technical proposition and focus on carbon usage data to support reduced emissions in both CCF's and customers' fleets.

The integration of the Group’s Staircraft business is going well with the potential to deliver these services to existing major customers being explored.

During the first half of 2022, a net 42 new branches were added, with six more remodelled or relocated. In line with strategic priorities, the majority were in Toolstation and the General Merchant, including Benchmarx, but capital is also being deployed into TF Solutions to build scale and capability.

The strategic changes made in the last two years have reshaped the Group to be a portfolio of trade-focused market-leading businesses with broad exposure across all sectors of UK construction.

Whilst management is mindful of the macroeconomic uncertainty, this end market diversification, coupled with long-term structural drivers, provides the group with a resilient outlook. 

The company sees the long-term fundamental drivers of its end markets as remaining robust. The UK faces a shortage of new and affordable housing, alongside a significant backlog of maintenance and improvement work on public sector assets post the pandemic.

The need to decarbonise an ageing housing stock is growing in urgency given the sharp increase in energy costs and government policy is supportive of significant investment in road, rail and green power generation infrastructure.

The group sees its portfolio of businesses to be ideally placed to partner with the construction industry to deliver on this agenda.

Supported by resilient end markets, agility in responding to market conditions and strong execution, the Group’s Merchant businesses’ strong first half performance is set to continue through the second half.

This strong Merchanting performance will be offset by the impact of both the normalisation of Toolstation’s customer base and the continued investment in growth in Toolstation UK and Europe.

As a result, the Group overall is expecting to deliver a full year performance broadly in line with market expectations.

Looking at the coming month, the report considers macroeconomic volatility to be a principal risk for the business, as the first half of the year has seen increasing inflationary pressure, sterling underperforming against a broad range of currencies, and the start of the war in Ukraine that has in turn led to rising commodity prices and supply disruption.

As a result, the Directors now consider macroeconomic volatility to present an increasing risk trend with a high level of inherent risk.

The group continues to include a Covid-related risk in its principal risk set, which has been broadened in the latest review to consider wider public health matters alongside the impact of further Covid variants.

Nick Roberts, Chief Executive Officer, commented: “The Group has delivered a good performance during the first half of the year, once again demonstrating the capability to navigate challenging market conditions.

“Our Merchant businesses continue to perform well, taking market share and extending their market leading positions by developing the customer proposition to meet changing requirements within their respective markets.

“Toolstation’s customer base returned to its core trade customer in the period following exceptional trading during the pandemic. We have made great progress in enhancing the trade offer in Toolstation and customers have responded positively.

“We remain as confident as ever in the long term growth potential of the business and in our UK investment programme, whilst also increasing investment in Toolstation Europe to take advantage of the opportunities we see in those markets.

“Whilst we are cognisant of the current macroeconomic uncertainty, our diverse end market exposure, broad trade customer base and strong balance sheet provide resilience against changes in market conditions. The strong performance of our Merchant businesses is set to continue into the second half, driven by our agility in managing inflation and by our leading service propositions.

“This will be offset by a combination of the normalisation of Toolstation’s customer base and the increased investment in the Toolstation growth opportunity in the UK and Europe. As a result, we expect the Group overall to deliver a full year performance broadly in line with market expectations.”