PENN Entertainment Inc
SWB:PN1
PENN Entertainment Inc
PENN Entertainment Inc., formerly known as Penn National Gaming, has carved a distinctive path through the evolving landscape of the gaming and entertainment industry. Founded in 1972, the company began its journey in the racing world, offering betting on thoroughbred and harness racing tracks. Over the decades, PENN expanded its horizons, dynamically adapting to the shifting sands of the gambling market. This evolution saw the company burgeon from its initial racing focus to becoming a formidable force in the casino business, boasting an extensive portfolio that includes both traditional brick-and-mortar casinos and, more recently, a significant stake in the burgeoning online gaming and sports betting sectors. With properties spread across the United States and Canada, PENN Entertainment has diversified its offerings, ensuring a wide range of gaming experiences from slot machines and table games to racetrack casinos and hotel accommodations.
The company's revenue springs from a multifaceted business model designed to maximize entertainment and hospitality offerings. At the heart of PENN's operations is its casino business, contributing a substantial portion of its income through gaming operations. PENN captures diverse gambling audiences by leveraging loyalty programs and strategic partnerships, like the collaboration with Barstool Sports. This partnership has been pivotal in capturing the digital gaming demographic, driving the company's expansion into sports betting and online gambling through platforms like Barstool Sportsbook. Additionally, PENN's engagement in hospitality services—ranging from fine dining experiences to entertainment events—enhances its appeal and boosts ancillary income streams. Through these multi-tiered strategies, PENN Entertainment strategically maneuvers its assets to capitalize on both traditional and digital gaming trends, robustly positioning itself in a competitive industry landscape.
Earnings Calls
The company reported a remarkable 24% growth in annual revenue, surpassing pre-pandemic levels by over 10%. Operating profit rose significantly, with an improved operating margin between 6% and 8.5% anticipated moving forward. Toolstation demonstrated robust performance, expecting a billion-pound outlook by 2025. The UK market saw revenue growth of 19%, while Europe followed with a 35% increase. Notably, property profits are forecasted to drop from £49 million to £25 million, yet total operating profit is expected to show progress. The company aims to open 60 new branches in 2022, indicating strategic expansion and optimism in market conditions.
You don't have any saved screeners yet
Well,
good
morning
to
you
all,
and
a
warm
welcome
to
everybody
in
the
room
and
on
the
webcast,
for
our
first
in-person
results
briefing
in
two
years,
which
has
been
rather
denuded
unfortunately
by
the
Tube
strike.
I
would
also
say
to
you,
Dydd
Gŵyl
Dewi
Hapus,
Happy
St.
David's
Day
from
me
to
you
all.
I'll
open
with
some
reflections
and
then
hand
over
to
Alan
for
our
financial
and
operational
update
before
I
return
with
a
strategic
update
and
look
ahead.
Let
me
first
capture
the
year,
if
I
may.
2021
was
a
year
of
significant
progress
for
the
group.
We
successfully
navigated
a
very
challenging
market
in
all
our
businesses
and
produced
what
we
think
is
a
superb
financial
performance.
Our
performance
underpinned
by
operational
and
strategic
progress
across
the
group.
We
were
true
to
our
promise
to
focus
on
the
trade
and
simplify
the
group.
We
demerged
the
Wickes
business,
we
sold
our
Plumbing
&
Heating
business,
we
strengthened
our
balance
sheet,
and
we
repatriated
excess
capital
to
shareholders,
all
the
while
growing
our
business;
new
branches,
new
propositions,
new
digital
channels,
and
winning
share
by
focusing
on
our
strategy
for
the
future
to
be
the
leading
partner
to
the
construction
industry.
That
means
doing
more
for
our
customers
by
adding
new
and
exciting
capability
to
our
business
and
it
strengthens
our
investment
story
for
new
and
existing
shareholders.
All
of
which
is
enabled
through
our
energized
and
confident
teams
across
the
business,
full
of
confidence,
full
of
self-belief
after
a
challenging
yet
exhilarating
couple
of
years
in
the
business.
And
they
feel
that
they
have
the
support
and
the
capability
to
win
and
execute
the
strategy.
So,
I'm
incredibly
proud
of
what
we've
achieved
last
year
and
how
now
we
are
well-positioned
for
the
future,
remaining
true
to
who
we
are
and
our
purpose.
We're
here
to
build
better
communities
and
enrich
lives.
And
that's
a
theme
I'll
return
to
later.
But before that, over to Alan.
Thanks,
Nick.
And
good
morning,
everyone.
So
as
Nick
mentioned,
the
group
delivered
a
really
excellent
performance
in
2021
in
addition
to
delivering
the
demerger
of
Wickes
and
the
disposal
of
Plumbing
&
Heating.
On
that
note,
I
should
remind
you
that
the
2020
income
statement
and
cash
flow
have
been
restated
to
exclude
the
discontinued
operations.
And
any
comparisons
that
I'll
draw
to
2019
will
also
be
on
a
continuing
operations
basis.
The
group
recovered
strongly
from
the
pandemic
with
annual
revenue
growth
of
24%,
helped
by
both
strong
execution
and
the
market
recovery.
Perhaps
more
meaningfully,
revenue
was
over
10%
higher
than
in
2019
with
broadly
similar
growth
overall
in
each
half
on
a
two-year
basis.
Adjusted
operating
profit
was
also
significantly
ahead
of
2020,
and
some
19%
of
ahead
of
2019
on
a
comparable
basis
with
consequent
growth
in
operating
margin.
The
strong
operational
performance
alongside
continued
disciplined
capital
management
led
to
a
much
improved
return
on
capital
employed
at
12.1%
excluding
property
profits.
Net
debt
to
EBITDA
leverage
on
an IFRS
16
basis
reduced
to
1.2
times.
And
on
a
pro
forma
basis,
that
is
adjusting
for
the
proceeds
of
the
P&H
disposal
still
to
be
returned
to
shareholders
at
the
yearend.
We're
at
the
lower
end
of
the
range
that
we
laid
out
in
September
last
year,
namely
around
1.5
times.
While
cash
conversion
was
lower
in
2021,
this
was
entirely
down
to
the
growth
in
credit
sales
year-on-year,
and
cash
conversion
looked
at
over
2020
and
2021
combined
with
over
100%.
Finally,
the
Board
is
proposing
a
final
dividend
of
£0.26
per
share
to
take
the
ordinary
dividend
distribution
for
the
year
to
£0.38
per
share
or
around
35%
of
adjusted
EPS.
This
is,
of
course,
in
addition
to
the
special
dividend
we've
paid
at
£0.35
per
share.
Looking
at
the
revenue
performance
in
more
detail,
slide
7
provides
a
bridge
of
the
key
drivers
from
2019
to
2021.
I
would
highlight
three
key
features.
Firstly,
you
can
see
the
impact
to
the
volume
declines
in
2020
from
both
the
pandemic
and
the
branch
closure
program
in
June
of
that
year.
In
2021,
there
is
an
annualization
impact
from
the
latter
but
a
very
significant
positive
contribution
from
underlying
volume
growth
at
£655
million.
The
second
key
feature
is
pricing
and
mix.
This
was
a
negligible
feature
in
2020,
but
it
contributes
£305
million
of
growth
in
2021,
an
indication
of
the
scale
and
the
successful
recovery
of
input
cost
inflation.
Finally,
in
both
years,
you
can
see
the
positive
impact
from
the
expansion
of
Toolstation.
In
aggregate
versus
2019,
revenue
was
10.6%
ahead.
Underlying
volume
has
grown
by
7%,
partly
offset
by
the
net
space
reduction
of
3%,
and
pricing
and
mix
have
contributed
a
growth
of
7
percentage
points.
Turning
to
slide
8,
I've
broken
out
the
year-on-year
drivers
of
the
strong
operating
performance
at
£353
million.
Versus
2020
of
course,
the
largest
driver
is
the
gross
profit
growth
from
incremental
volume
at
£249
million.
This
gross
profit
delivery
was
further
boosts –
bolstered
to
the
tune
of
£49
million
by
strong
margin
management.
Both
the
successful
recovery
of
input
cost
inflation
and
the
year-on-year
recovery
in
volume
related
supplier
incentives.
I've
then
highlighted
various
cost
increase
elements,
namely
the
non-recurrence
of
government
assistance
which
was
received
in
2020,
inflationary
elements,
including
the
return
to
payment
of
bonus
programs
after
zero
in
the
prior
year
and
variable
costs
to
service
the
incremental
volume.
Next,
you
can
see
the
contribution
of
£50
million from
the
annualization
of
the
branch
closure
program.
This
disciplined
approach
to
overheads
led
to
a
strong
drop
through
of
gross
profit,
resulting
in
an
operating
margin
before
property
profits
of
6.6%.
And
finally,
in
terms
of
property
profits,
these
totaled
£49
million
in
the
year,
with
cash
receipts
of
£78
million.
Our
property
team
did
an
outstanding
job
in
exiting
sites
closed
in
June
2020,
along
with
the
disposal
of
the
former
Tilbury
distribution
center.
I'm
now
turning
to
segmental
views.
If
we
start
the
reporting
segments
with
Merchanting,
the
excellent
performance
was
driven
by
the
operational
initiatives
put
in
place
over
the
last
24
months
to
strengthen
the
business
underpinned
by
the
recovery
in
end
markets.
Compared
to
2019, like-for-like
sales
were
some
12%
ahead.
Now,
as
you're
well
aware,
the
speed
of
recover
caused
some
availability
issues
and
led
to
significant
supply
price
increases.
Our
businesses
are
highly
adept
at
managing
these
issues,
and
while
availability
issues
have
now
largely
eased,
we
do
anticipate
further
cost
price
increases
throughout
2022.
At
the
Capital
Markets
Update
in
September,
Kieran
covered
the
actions
taken
over
the
last
couple
of
years
to
improve
the
competitive
position
of
the
General
Merchant
to
enhance
service,
build
capability,
and
these
actions
enabling
the
business
to
benefit
from
the
volume
recovery.
Our
specialist
merchants
also
benefited
from
improved
efficiency
following
the
2022
branch
rationalization
program
with
both
BSS
and
Keyline
achieving
record
profits.
CCF
recovered
well
despite
having
the
biggest
challenges
from
product
availability
with
key
products
and
allocation
for
much
of
2021.
Given
the
strong
operating
leverage,
operating
margin
in
2021
was
8.4%,
some
70
basis
points
ahead
of
2019.
And
as
we
discussed at
the
Q3
trading
update,
around
40
basis
points
of
this
recovery
stemmed
from
inflation
gains
and
stock
and
this
is
not
expected
to
repeat
in
2022.
I
do,
however,
expect
that
operating
margin
will
remain
around
the
8%
mark
with
mid-to-high-teens
return
on
capital
employed.
Toolstation's
outperformance
continues
with
growth
of
over
20%,
taking
a
two-year
growth
figure
to
over
50%.
Growth
in
the
second
half
was
lower
as
the
business
cycled
the
strongest
comparators
from
2020.
We
anticipate
this
will
also
be
the
case
in
the
first
four
months
or
so
of
2022
before
the
comparators
ease.
Importantly,
the
business
continues
to
perform
well
with
its
core
trade
customers.
During
H2
2021
in
the
UK
business,
we
saw
those
higher
spending
trade
customers
continuing
to
grow
at
over
20%.
In
the
UK,
revenue
grew
by
19%
and
was
54%
ahead
of
2019
with
operating
profit
growth
of
£42
million
and
an
operating
margin
of
6.3%
in
line
with
our
expectations
at
the
stage
of
the
businesses
development
and
despite
the
heavy
investments
in
the
branch
network
over
the
last
couple
of
years.
Encouragingly,
branches
open
during
the
last
three
years
are
maturing
more
quickly
than
those
open
in
previous
years.
We
anticipate
opening
a
further
60
branches
in
2022
in
the
UK
to
take
the
total
to
close
to
600
branches.
In
late
2022,
Toolstation
UK
will
open
a
new
500,000
square
feet
direct
distribution
center,
initially
servicing
Toolstation
only
but
with
the
potential
to
service
direct
light
side
sales
for
the
General
Merchants
as
well.
We
anticipate
startup
costs
expensed
through
the
operating
profit
line
of
around
£5
million
in
each
of
H2
2022
and
H1 2023.
Turning
to
Europe,
revenue
grew
by
35%
to
£92 million
as
the
network
was
expanded
by
40
branches
to
123 branches
in
total.
In
the
Benelux,
sales
grew
by
32%
with
the
Dutch
business
narrowing
losses
and
on
track
for
breakeven
by
the
end
of
2023.
In
France,
we
opened
a new
distribution
center
to
support
future
growth
in
the
southeast
and
doubled
the
number
of branches.
At
this
early
stage
of
2022,
I
would
anticipate
a
similar
loss
overall
in
Europe
to
2021.
Free
cash
flow
generation
in
2021
was
£65
million
as
working
capital
was
rebuilt
given
the
trading
recovery.
The
increase
in
working
capital
of
£152
million was
driven
entirely
by
the recovery
in
credit
sales.
The
credit
book
continues
to
be
really
well-managed
with
record-low
overdues
as
a
percentage
of
credit
sales.
The
increase
in
stock,
including
the
impact
of
cost
price
inflation,
was
fully
offset
by
the
increase
in
the
corresponding
creditor
position.
And
as
we
discussed
at
the
Capital
Markets
Update
in
September,
we
remain
very
focused
on
the
conversion
of
profits
into
cash.
And
as
I
said
earlier,
taken
together,
we
delivered
cash
conversion
of
111%
across
2020
and
2021.
Looking
at
the
breakdown
of
capital
expenditure
on
slide
12,
around
70%
of
the
base
expenditure
of
£95
million
was
on
our
strategic
priorities,
specifically
Toolstation
branch
roll
out,
putting
down
new
larger
General
Merchant
branches,
TF
Solutions
expansion,
and
tool
hire.
Maintenance
CapEx
was
lower
in
2021
as
vehicles
were
redeployed
from
closed
branches
and
the
group
experienced
lengthening
lead
times
for
vehicles
and
manual
handling
equipment.
I
would
expect
maintenance
CapEx
in
2022
to
form
around
35%
of
total
spend.
As
measured –
as
mentioned,
sorry,
earlier
in
connection
with
property
profits,
excellent
progress
was
made
on
the
disposal
of closed
sites
and
a
cash
inflow
of
£81
million
– £82
million fully
funded
the
acquisition
of
a
number
of strategic
freehold
sites
for
the
merchants
and
businesses.
Turning
to
2022,
our
updated
guidance
is
for
base
CapEx
of
around
£140
million,
ahead
of
the
previous
expectation
of
£125
million.
This
increase
is
driven
by
a
decision
to
automate
the
new
Toolstation
direct
distribution
center
and
thus
enable
us
to
better
manage
the
labor
requirement
while
delivering
a
more
efficient
and
lower
cost
service.
If
I
move
on
to
capital
structure,
the
balance
sheet
has
been
transformed
as
a
result
of the
portfolio
actions.
Net
debt,
as
measured
for
covenant
purposes,
was
£87
million
at
the
31st
of
December,
with
lease
liabilities
reduced
by
over
£900
million
over
the
last
two
years.
At
the Capital
Markets
Update
in
September.
I
set
out
for
you
a
target
leverage
range
of
1.5 times
to
2
times
on
a
lease
adjusted
basis.
This
is
compatible
with
investment
grade
debt
metrics,
and
hence
an
optimized
cost
of
funds
for
the
group.
I
said
we
want
to
operate
towards
the
lower
end
of
the
range
in
the
next
couple
of
years,
and
on
a
pro
forma
basis
adjusting
for
P&H
proceeds
still
to
be
returned
via
buyback,
yearend
leverage
was
1.5
times.
You
will
have seen
that
we
have
announced
this
morning
the
final
tranche
of
that
buyback
program,
having
completed
£170
million
to-date
to
return
the
P&H
proceeds
to
shareholders
in
full.
The
significantly
strengthened
balance
sheet
enables
the
group
to
invest
in
strategic
growth
opportunities,
such
as
the
expansion
of
Toolstation
and
the
acquisition
of
Staircraft,
while
at
the
same
time
creating
a
scope
for
additional
shareholder
returns
over and
above
the
ordinary
dividend.
So
in
terms
of
the
outlook,
the
lead
indicators
for
our
markets
remain
encouraging
with
improved
levels
of
housing
transactions,
leading
to
ongoing
strength
in
both
RMI
and
new
house-building.
We've
seen
an
improvement
in
commercial
markets
particularly
in
commercial
RMI,
and
the
outlook
for
infrastructure
is
positive.
As
we've
demonstrated
in
2021,
we're
very
adept
of
recovering
input
cost
inflation
through
pricing
activity
and
at managing
availability
challenges
effectively.
The
group
is
in
great
shape,
and
given
the
robust
end-market
demand
and
a
positive
start to
the
New
Year,
we
are
confident
of
making
further
progress
in
2022.
And
with
that,
I'll
hand
back
to
Nick
and
look
forward
to
taking
questions
later.
Excellent.
Thanks,
Alan.
I
hope
you
agree
that
what
Alan
has outlined
represents
a
tremendous
operational
and
financial
performance.
So
now,
I'm
just
going
to
touch
on
some
elements
of
the
strategic
progress
that
we've
made
since
we
last
met
at
the
end
of
September.
First,
let's
just
remind
ourselves
of
the
dynamics
of
some
of
our
end-markets,
just
to
build
out
some
of
the
comments
that
Alan
made.
Being
blunt,
the
planning
system
and
the
construction
industry
is
failing
to
meet
the
needs
of
the
country
in
terms
of
new
and
affordable
housing.
And
UK's
legacy
housing
stock
remains
underinvested,
particularly
in
terms
of
energy
efficiency.
Furthermore,
we
have
to
continue
to
repair,
maintain
and
improve
our
social
infrastructure;
schools,
hospitals,
prisons,
other
public
buildings,
and
that
work
is
well-served
by
our
specialist
merchants,
BSS,
CCF
and
the
General
Merchant.
And
infrastructure
continues,
quite
rightly,
to
attract
high levels
of
investment
and
a
positive
policy
backdrop
from
the
government.
But
these
needs
support
our
view
that
our
markets
remain
robust
in
the
long-term,
particularly
from
the
RMI
perspective.
In
addition,
our
customer's
requirements
and
their
needs
and
their
behaviors
continue
to
change
in
the
construction
process,
the
industry
we
serve
continues
to
change
as
we
face
into
labor
and
skills
challenges
and
the
need
to
use
different
materials
and
materials
more
efficiently
in
the
construction
process
and
to
continue
to
take
out
cost
and
complexity.
So
against
this
backdrop,
we
continue
to
feel
that
we
are
uniquely
placed
to
be
at
the
forefront
of
the
change
and
benefit
from
those
positive
market
dynamics.
So
against
that
backdrop,
let's
have
a
quick
recap
of
what's
at
the
core
of
our
strategy
that
we
ran
through
back
at
the
end –
at
the
back
end
of
September.
We
remain
absolutely
relentless
in
our
focus
on
our
relationship
with
our
customers
to
meet
their
needs
now
and
in
the
future.
And
that
is
all
in
service
of
us
achieving
our
ambition
to
become
the
leading
partner
to
the
construction
industry,
but
this
requires
us
to
do
more
for
our
customers.
So
how
are we
doing
that?
So
as
before
we
recognize
two
key
customer
cohorts
for
our
business;
our
professional
trades
and
general
builder
customers
who
really
need
price
transparency,
stock
accuracy,
convenience,
particularly
around
and
increasingly
around
Click
&
Collect,
delivered
fulfillment, accuracy, expertise
on
materials particularly
with
respect
to
sustainability
increasingly.
And
our
larger
developer
and
contractor
customers
who
need
fulfillment
reliability,
accuracy,
seamless
data
integration,
sustainability
advise
again
increasingly,
and
removing
time
and
complexity
on
their
sites.
So,
we're
actively
deepening
our
relationship
with
our
customers
to
earn
a
greater
share
of
their
wallet
by
doing
what
we
do
in
a
simpler
and
more
convenient
way
for
them.
But
we're
also
elevating
our
relationship
with
our
customers
by
adding
new
value
and
more
value
to
their
businesses,
taking
away
costs,
taking
away
complexity,
reducing
time
on
sites,
introducing
them
to
more
efficient
materials
and
ways
of
working.
And
we're
to
solve
our
customers'
problems
fundamentally.
As
we
made
progress,
we
remain
focused
on
delivering
this
value
through
our
five
leading
business
units.
But
we're
also
leveraging
the
power
of
our
group
assets
to
bring
additional
value
to
our
customers. And
I'll
cover
that.
So,
let
me
take
you
through
some
areas
of
progress.
And
I
stress
that
these
are
not
exhaustive.
We've
got
multiple
areas
in
play.
But
I
just want
to
give
you
a
sense
of
the
progress
we're
making
and
how
we're
putting
capital
effectively
to
work.
So,
we
continue
to
make
great
progress
in
deepening
our
relationship
with
our
customers
by
really
optimizing
our
branch
channel
experience
and
really
being
disciplined,
as
Alan
said,
in
our
investment
in
our
branch
channels.
And
it's
all
in
service
of
making
us
more
convenient
and
simple
to
do
business
with;
accurate,
simple,
convenient,
right
stuff
at
the
right
place
at
the
time
for
our
customers,
all
underpinned
by
our
knowledgeable
colleagues
in
our
branches.
So,
we
continue
to
open
new
destination
branches
where
we
can
further
grow
market
share
and
actually
integrate
services
around
the
core
product
offer.
So,
that's
higher
and
Benchmarx
into
our
TP
branches.
As
Alan
mentioned,
TF
Solutions
and
higher
into
our
BSS
branches.
And
these
new
and
existing
branches,
we're
really
investing
in
capability
in
our
colleagues
to
really
increase
the
penetration
of
our
customer
base
with
a
deeper
and
broader
offer.
When
you
visit
these
destination
branches,
I
was
out
in a
number
last
week,
they
really
work
and
customers
love
them.
They
really
love
the
fact
that
integrated
services
are
juxtapositioned
with
our
core
product
offer.
But
we
continue
to
invest
in
new
branches
as
well.
New
CCFs
in
West
London
and
East
Birmingham,
and
we've
expanded
our
TF
branch network – TF Solutions
branch
network
by
five
last
year.
And
we
anticipate,
as
we
said
at
the
CMU,
a
more
than
30%
return
on
the
investment
in
new
and
redeveloped
General
Merchant
branches
alike.
As
Alan
touched
on,
we
continue
to
roll
out
our
Toolstation
network.
77
new
branches
in
the
UK,
that's
now
a
total
of
just
over
530,
123
now
in
Europe.
And
we're
successfully
deepening
the
relevance
of
our
Toolstation
branches
to
our
trade
customers
by
our
new
essentials
front-of-house
range
core
trade
items
that
are
regularly
needed
for
replenishment
right
at
the
front
of
the
branch.
And
our
trade
customers
absolutely
love
that
sort
of
development.
And
it's
coupled
with
new
trade
credit
services
in
our
Toolstation
business,
uptake
of
which
has
accelerated
over
the
last
few
months.
And
we've
also
opened
our
first
Toolstation
branch
in
a
new
TP
branch
in
Swindon.
Absolutely
true
to
us
furthering
the
collaboration
between
our
businesses
and
again
making
it
simpler
and
more
convenient
for
our
customers
to
get
what
they
need
in
one
place
and
deepening
our
relationship
with
them.
So,
it's
too
early
to
discuss
progress
on
that,
but
we're
moving
forward
with
that
collaboration
really
positively.
But
it
doesn't
stop
there.
So,
we're
using
technology
to
further
deepen
our
relationship
with
our
customers.
Progress
through
our
online
and
app
channels
has
been
really
positive
over
the
last
year.
This
time
last
year,
we
had
a
basic
online
presence
in
our
General
Merchant
and
a
good
robust
online
presence
in
Toolstation.
We've
now
got
vastly
improved
online
channels
for
our
customers
using
AI
to
really
optimize
the
experience
that
they
get, and
the
feedback
for
that
online
channel
has
been
fabulous.
And
we
got
great
trust
pilot
scores,
but
we've
also,
as
we
mentioned
at
the
CMU
so
many
of
you
will
be
aware,
got
now
new
mobile
apps,
which
actually
put
in
our
customers'
pockets
access
to
their
account,
their
pricing,
and
the
ability
to
organize
transactions
and
fulfillment
with
us.
And
they've
been
extremely
popular,
and
they
are
generating
at
least
a
25%
increase
in
AOV.
So,
we've
also
implemented
a
simple
digital
onboarding
process
for
our
trade
credit,
and
that's
rapidly
increasing
participation
through
the
back
end
of
last
year.
We're
also
building
on
our
fabulous
five-minute
Click &
Collect
proposition
in
Toolstation
by
adding
a
one-hour
Click
&
Collect
within
the
General
Merchant
for
our
heavy
building
materials.
That's
really
enhancing
our
customers'
time
efficiency
for
picking
up
whatever
they
need
in
getting
back
to
their
sites,
and
it's
rounded
out
now
by
the
complete
rollout
across
our
Merchant
businesses
of
our
delivery
management
system,
so
customers
can
track
the
vehicle,
having
booked
a
timeslot,
see
the
vehicle,
know
what
time
it's
going
to
come
to
them,
and
they
can
track
it
directly
to
the
site,
which
really
optimizes the
efficiency
with
which
they
are
managing
their
sites.
And
we're
building
out
that
platform
with
further
enhancements
to
come.
So
for
our
a
cohort
of
larger
developer
and
contractor
customers,
we're
really
working
with
them
and
now
moving
from
pilot
phase
into
operation,
bespoke
Web
channels
to
them
allowed –
allowing
seamless
account
management
and
fulfillment
capability,
really
taking
time
and
complexity
out
of
their
business.
We're
also –
and
this
is
important
for
all
people,
we're
also
using
our
mobile
apps
to
digitize
the
colleague
in-branch
experience.
We're
digitizing
analog
paper-based
processes,
goods
in,
permanent
inventory
counts,
and
now
ticketing
services
within
our
branch,
so
our
customers
and
our
colleagues
are
seeing
the
benefits
of
our
use
of
technology,
and
again,
taking
time
and
complexity
out
of
our
business.
So,
this
is
all
enabling
us
to
really
focus
on
deepening
our
relationship
with our
customers
and
earning
a
greater
share
of
their
wallet.
So,
how
are
we
doing
in
what
we
call
elevating
our
relationship
with
our
customers
to
add
more
value?
So,
we're
using
our
technology
capability
and
our
knowledge
of
our
materials
and
sustainability,
to
add
more
value
to
our
larger
customers,
wherein
– where
we're
in
long-term
trusted
relationships.
So,
for
example,
we're
using
our
branch
assets
to
create
dedicated,
local,
efficient
replenishment
centers
and
hubs
for
our
customers
to
work
with
their
teams in
those
locations.
And
true
to
our
purpose
of
developing
the
next
generation
of
skills
for
our
industry,
we're
also
involving
local
college
students
in
those
locations,
to
introduce
new
and
low
carbon
technologies
to
our
customers
and
actually
train
their
operatives
alongside
our
colleagues
to
fit
technologies
like
PV
and
air
source
heat
pumps.
And
we're
optimizing
our
technology
platform
for
those
customers
to
ensure
that
their
fulfillment
requirements
are
met
really
efficiently.
That's
also
increasing
as
value
added.
The
participation
and
use
of
our
higher
business
and
we've
also
introduced
new
waste
management
solutions
for
those
customers
through
the
elevation
of
our
relationship
with
them,
so
really
positive
progress
made
there.
As
you
know,
we
acquired –
fully
acquired
Staircraft
in
the
autumn
as
a
way
of
really
enhancing
our
business
with
new
capability.
They
have
leading
design-led
timber
engineering
capability
and
complex
structural
elements
of
houses.
So
in
addition
to
the
staircase,
floors,
door
kits,
precut
moldings,
all
elements
that
take
time
and
complexity
out
of
a
build.
So,
we've
applied
artificial
intelligence
to
the
design
of
modular
floor
systems,
joists,
and
floors
that
are
now
being
supplied
to
five
of
the
UK's
largest
house
builders.
They
dramatically
improve
the
structural
integrity
of
the
floor
system.
They
reduce
installation
time,
they
reduce
waste
dramatically,
they
reduce
costs
and
improve
safety
on
site.
And
we're
applying
this
capability
to
many
more
customers
and
it
is
taking
out
time
and
complexity
in
the
construction
progress.
So
as
you
can
see,
we're
being
true
within
that
elevating
our
customer
relationship
to
playing
our
part
in
modernizing
the
construction
process
in
the
UK
with
clever
design
and
new
ways
of
working.
So
to
recap
then,
we've
made
good
early
progress
in
our
strategy.
We're
making
sound
investments
which
really
deepen
our
relationship
with
our
customers,
and
we're
also
finding
ways
based
on
our
relationships
to
elevate
our
relationship
with
our
customers
and
add
more
value
and
really
progressively
achieve
the
partnership
role
that
we
want.
Our
customers
are
really
appreciating
it
and
our
colleagues
are
really
energized
by
it.
So,
all
of
this
supports
and
is
completely
aligned
with
our
very
clear
purpose
that
we
shared
in
September.
We're
here
to
build
better
communities
and
enrich
lives.
Our
ambition
is
clear;
to
be
the
leading
partner
to
the
construction
industry
and
we're
making
really
good
progress.
I've
also
outlined
that
we're
playing
our
part
in
modernizing
the
construction
process, but
we're
also
at the
heart of
decarbonizing
our
industry.
We've
set
our
Scope
3
target,
which
we
announced,
and
for
our
Scope
1, 2,
and
3
carbon
targets,
we
received
approved
Science-Based
Target
initiative
for
the
1.5-degree
pathway.
We've
published
on
our
website
and
are
delivering
our
carbon
reduction
roadmaps.
And
we're
also
at
the
heart
of
generating
the
next
generation
of
skills.
We
invested
in
nearly
1,000
apprenticeships
for
new
and existing
colleagues
during
the
year,
and
we
brought
500
Kickstart
colleagues
into
the
business,
75%
of
whom
are
remaining
with
a
business
on
a
permanent
basis.
That
is
us
being
really
true
to
our
purpose
and
developing
our
business.
So,
what
you've
seen
over
the
last
three
years
is
a
fundamental
shift
in
the
shape,
the
focus
and
the
strength
of
this
group.
We're
serving
our
customers
through
five
leading
trade-focused
businesses
and
we've
strengthened
the
group
and
its
balance
sheet.
We've
accelerated
much
needed
change
and
we're
really
at
the
forefront
of
changing
our
industry.
And
we
have
a
unique
set
of
assets
and
capabilities
that
we're
deploying
for
our
customers
by
deepening
and
elevating
our
relationship
with
them,
not
as
a
home
improvement
retailer,
but
as
a
best-in-class
value-added
distributor,
really
helping
our
customers
solve
their
problems
by
adding
value
and
finding
ways
forward,
all
on
the
way
to
becoming
the
leading
partner
to
the
construction
industry.
So,
I
think
we've
made
a
fantastic
start
to
this
journey.
We're
very
respectful
of
our
history,
but
we're
not
looking
back,
we're
only
looking
forward.
We
laid
out
in
September,
we
got
a
clear,
repeatable
model
focused
on
delivering
TSR,
positioning
our
five
principle
businesses
to
grow
above
the
market,
deepening
and
elevating
our
relationship
with
customers,
strong
cash
conversion,
management
of
working
capital
as
Alan
outlined,
and
funding
growth
from
within
our
business
through
our
rigor
and
disciplined
allocation
of
capital,
providing
attractive
earnings
growth
and
good
dividends
for
our
shareholders
and
the
potential
to
return
further
excess
capital
to
shareholders
in
the
future.
So,
I'm
incredibly
proud
of
what
we've
achieved
in
2021,
delivering
on
our
promises,
doing
exactly
what
we
said
we
would
do,
delivering
our
strategy
relentlessly,
rigorously
with
real
discipline
and
at
pace,
and
focusing
on
our
customers
and
building
better
communities,
being
at
heart
of
the
construction
industry,
and
changing
the
lives
of
many
for
years
to
come.
So
thank
you
for
that.
Alan
and I
will
now
take
your
questions.
What
I propose
to
do
is
to
prioritize
questions
in
the
room,
if
I
may.
And
then
we
will
go
out
to
the
phone
lines.
So,
if
we
can
have
some
microphones,
Matt. Thank
you.
[indiscernible]
(00:33:19)
that's probably
the
best
way
to
do
it.
Okay.
Thanks.
Just
two
from
me.
Aynsley
Lammin
from
Investec.
I
wondered,
firstly,
if
you
could just
comment
on
the
kind
of
outlook
for
volumes
this
year.
I
know there's
some
fear
that as
kind
of
the
wider
economy
opens
up,
RMI's
had
this
big
boost
and
certainly
we're going
to
see
a
[indiscernible]
(00:33:37). Just
wondered
what
your
view
on
that
was
and
are
you
confident
volumes
are
at
least
kind
of
flat
for
the
market
this
year?
And
then
secondly,
you
talked
about
– you
expect
to
make
more
progress
this
year.
Would
that
be
correct
to
understanding in
that
progress
kind
of
group
profit
include
in
the
property
this
year?
So,
obviously
property
profits
towards
£25
million,
so
is
that
right
interpreting
that
way?
Thanks.
Do
you
want
to
me
start, Nick?
It
felt
quite
financial.
So,
on
the
volume
outlook,
and
I'll
let
Nick
comment
as
well,
of
course.
I
think
we're
confident
in
the
market
volume
outlook.
So,
I
don't
see
any
reason
why
volume
should
go
down
in
trade-focused
markets.
When
we
talk
to
our
customers,
they
still
have
strong
order
books.
I
took
you
through
earlier
some
of
the
segments
and
I've
used
there.
So,
RMI,
why
do
I
think
domestic
RMI
is
well
supported
where
we
saw
a
significant
uptick
in
housing
transactions?
Housing
transactions
may
do
their
thing
during
the
year.
They
could
be
lower
than
last
year,
but
we
know
– history
shows
us
that
when
people
move
home,
they
spend
money
on
the
new
home
in
the
18, 24
months
after
moving.
So,
I
think
that's
a
supportive
environment.
We
know
from
the
house
builders –
the
volume
house
builders,
they
are
looking
to
build
more
units
each
year.
I
mentioned
that
we'd
seen
a
pickup
in
commercial
markets
including
in commercial
RMI.
We've
seen
a
corresponding
pickup
in
things
like
social
housing
as
well.
Some
of
those
areas
that
were
the
slowest
to
recover
from
the
pandemic,
we've
seen
those
accelerate
recently.
And
we're
doing
more
in
infrastructure
going
forward
as
well. So I think the volume environment overall is favorable for us.
In terms of the second question, Aynsley, more progress. We do mean more progress on operating profit. You're right to point out that the guidance is that property profits will go from £49 million to £25 million, but not withstanding that,
I
expect
a
nudge
forward
on
the
total
operating
profit
for
the
group.
Aynsley,
I'd
only
add
from
a
non-financial perspective
just
to
Alan's comments,
look,
the reason
we think RMI
remains
robust
is that
people
make
long-term
decisions,
and many
of
those people
who
are making
long-term
decisions
haven't necessarily
been
disadvantaged
by
the
pandemic.
And
indeed,
the
pattern
of
work
is
such
that
people
will
– many
people
will
remain
in
a
kind of
hybrid
mode.
So
investments
in
their
property,
if
we
look
at
domestic
RMI,
we
think
will
remain
robust
through
the
year.
And
as
I
and
Alan
said,
the
social
infrastructure
RMI
remains
very
pressing
indeed.
And
the
progress
we
intend
to
make
against
our
strategy
is,
as
I
outlined
there,
really
we're
making
some
early
good
progress
and
we
will
be
relentless
in
prosecuting
that
through
the
year.
Thanks,
Aynsley.
Will?
Thanks.
Will
Jones
from
Redburn.
Three,
please. I
think
around
Merchanting.
The
first
was
just
on
the
issue of
the
gross
margin.
Clearly,
the
inventory
gain of 40
bps
drops
out.
Is
there anything
else
to
bear
in
mind
around
gross
margin
in
2022? I
was
particularly
wondering around
customer
mix
if
new
build
is
faring
better
than
RMI
within
the
mix?
Second
one
was just
whether
you
had
any
early
view
around
how
Merchanting
performed
last
year
against
the
market,
perhaps
it's
affected
by
the
comps
in
2020, so
maybe
a
two-year
view,
but
just
any
sense
of
outperformance
or
not
in
that
business?
And
then
just
more
coming
back
to
price,
I
guess
if we
look
last
year, your
Merchanting
we
went
from
low-single
digits
to
low-double
digit
through
the
year,
I
think to
[ph]
average
9 (00:37:36).
Could
we
get
a
mirror
image
to
average
something
similar
do
you think
in
2022? Thanks.
I'd
better
start
on
those,
Nick.
They
feel
quite
financial.
So
on
gross
margin,
Will,
you're
right
the
40
basis
points
from
stock
inflation
will
drop
out
to
a
certain
extent.
I'm
not
sure it
will
fully
100%
drop
out.
And
the
reason
for
that
goes
a
bit
to
your
point
around
the
– your
third
question,
Will,
on
pricing
outlook.
So,
the
higher
the
level
of
cost
price
inflation
you
see,
the
more
likely
you
are
to
retain
in
effect
some
of
that
40
basis
points
because
you've
got
inflation
gains
on
the
stock
that
you
had
at
31st
of
December
2021.
In
terms
of
other
features,
I
think
it's
neutral
overall.
So,
you're
right
that
as
volumes
in
areas,
the
large
volume
areas
like
new
house
building,
social
housing
recover,
that's
a
slight
drag
on
the
gross
margin
but
it's
offset
by
some
of
the
added
value
things
that
we're
doing
including
areas
like
tool
hire.
So,
we
have
over
250
tool
hire
branches
within
TP
branches.
They've
all
been
adding
colleagues
because
of
the
level
of
demand
that
we're
seeing
at
the
moment.
So,
we're
better
able
to
service
that
demand.
In
terms
of
outperformance
or
not
in
Merchanting
in
2021,
to
a
certain
extent
it
was
a
year
of
two
halves
for
the
General
Merchant
where
we
are
annualizing
for
the
first
half
against
the
closure
of
branches.
But
as
we
got
into
the
second
half
of
the
year,
and
we're
no
longer
annualizing
that,
we're
confident
on
the
outperformance
there.
And
I
think
we
know
from
our
specialist
merchants,
they
have
been
outperforming
their
markets
for
six
or
seven
years.
They're
in
the
best
shape
they've
been
and
continue
to
perform
really
strongly.
And
then
on
the
question
on
pricing
outlook,
you
were
quite
right,
9%
inflation –
price
inflation
overall
on
2021,
6%
in
the
first
half,
growing
to
12%
in
the
second
half.
I
think
you're
right,
the
best
view
I've
got
at
the
moment
is
a
mirror
image
of
2021,
so
double-digit
cost
price
inflation,
low
double-digit,
I
should
stress
in
the
first
half
and
then
tailing
off
in
the
second
half.
We
are
still
seeing
manufacturer
price
increases
come
through.
Not
surprisingly,
anything
that's
energy
intensive,
I
would
expect
to
see
continued
price
increases
coming
through.
But
we're
very
confident
in
the
way
that
we
manage
those
through
with
our
customers.
Thanks,
Will.
So,
Gregor
Kuglitsch
from
UBS.
Maybe
a
couple
of
questions,
touching
maybe
on
Toolstation,
which
obviously
dipped,
I
think
slightly
negative
against
a
hard
comp
in
Q4.
If
you
just
care
to
comment
how
that
is
expected
to
evolve.
I
guess
the
comparators
are
still
pretty
challenging,
and
perhaps
if
you
could
give
us
sort
of
the
component
that
you
think
is
sort of
exposed
to
a
little
bit
of
DIY
unwind?
And
the
second
question,
if
you
just –
the
acquisition
that
you
made,
if
you
just
care
to
perhaps
elaborate
what
the
profit
and
sales
contribution
of
that
would
be? And
then
finally,
back
on
the
Merchanting
margin,
I
mean,
you
kind
of
just
in
your
answer
there,
you
were suggesting
you're going
to
have
basically
the
same
again.
So
the
question
is
why
should
the
stock
[indiscernible]
(00:41:29)
at
all,
perhaps
it's
a
more
2023
event
rather
than
2022? Thank
you.
You want to
start
with
Staircraft,
Nick?
Yes.
So
Staircraft
is
a
£55
million
revenue
business.
I
think
there are
some
details
in
the
back
of
the
note
there,
that
you'll
find
Gregor.
So,
a
£55
million
business
at a
kind
of
6%
operating
margin
that
obviously
now
a
big
part
of
the
group
with
value-added
that
we're
bringing
to
our
customers
and
the
integration
particularly
with
the
customers
in
the
General
Merchant
but
increasingly
the
BSS
and
CCF,
we
believe
that
will
move
favorably
over
the
next
few
years.
Alan,
do
you
want
to
come back on
Toolstation?
Yeah.
So
on
Toolstation,
Gregor,
I
think,
when
I
covered
on
slide
10,
my
comments
in
relation
to
Toolstation,
the
sales
mix
normalized
during
the
second
half,
so
we
saw
that
large
uptick
in
DIY
volumes
dropping
back
out
from
Q3
onwards.
So,
I'd
expect
that
to
continue
as
I
said
through
the
first
four
months or
five
months
of
2022
until
we're
no
longer
cycling
that.
The
key
factor
I
want
to
stress
about
Toolstation
is
that
our
regular
customers,
so
those
heaviest
spending
customers,
the
stats
there
on
the
page,
we
grew
22%
with our
customers
who
spend
over
£1,000 annually
with
this
in
the
second
half.
So
all we're
seeing
is
a
challenging
comp
as
the
DIY piece drops
through.
We're
very
confident
and
we
wouldn't
have
made
the
comments
we've
made
about
the
future
outlook
if
we're
not
confident
with
the
direction
of
travel
being
spot
on
what
we
had
expected
with
the
business.
So,
getting
to
a
6%
–
6.3%
operating
margin
in
the
UK
with
further
growth
to
come,
we're
confident
in
the
£1 billion-plus
outlook
for
2025.
And
we're
increasingly
confident
with
the
growth
path
in
Europe
as
well.
I
think
it's
been
an
absolutely
stunning
propositional
development
within
our
Toolstation
business.
And
that's
what
we're
seeing
particularly
and
focused on
our
trade
customers.
And
that
was
always
the
intention.
So,
we need
to
go
into
a
branch
and
see
what
the
team
have
done
around
the
front
of
house
in
the way
the
trade
interact
with
that
and
the
way
in
which
the
participation
is
increasing
in
our
trade
credit
service
through
Toolstation.
That's
what
we've
been
driving.
That's
what
we'll
return
in
this
business.
And
we
will
exit
the
comps
and
we
will
move
forward
with
the
plan.
So,
we're
really
excited
about
it.
And
I
think
absolute –
that
business
is
different
this
time
this
year
than
it
was
this
time
last
year.
I
mean
stunning
progress.
And
then
Gregor,
I
think
I
understood
your
question
on
Merchanting.
Let
me
answer
it
this
way,
we're
confident
in
where
we
are at
the
moment.
Some
of
the
areas
which
were
the
slowest
to
return
from
the
pandemic
are
big
areas
for
the
TP
Group
in
terms
of
the
Merchanting
segment.
So,
we've
got
momentum
from
those.
And
we're
also
confident
that
the
actions
that
we've
taken
in
the
General
Merchant
put
us
in
a
position
to
outperform.
And
to
operate
around
that
8%
to
8.5%
operating
margin
level
is
perfectly
fine
for
the
business
going
forward.
Thank
you.
Clyde
Lewis
at
Peel
Hunt.
Three
if
I
may.
One,
I
suppose
coming
back
on
price.
I
suppose
given
the
sort
of
movements
that
we've
seen
in
the
marketplace.
And
obviously, historically
the
group
has
sort of
jumped
around
a
little
bit
about
being
a
price
leader
in
terms
of
sort
of
wanting
to
maximize
price
as
opposed
to
being
a
bit
more
competitive.
What
have
you
done
I
suppose
within
the
key
businesses
in
terms
of
that
approach
over
the
last
6
to
12
months?
So,
have
you
looked
to
be
more
competitive
on
price,
have
you
actually
looked
to
lead
a
bit
more
on
price? And
I
suppose
linked
to
that
is
the
changes
that
you've
made
within
the
Green
&
Gold
in
terms
of
the
website
and
the
increased
pricing
visibility
that
sort
of
smaller
customers
have
got
there?
The
second one
I
had
was
on
Benchmarx.
I
think
it
got
one
very
small
mention
in
the
presentation.
What
do
I
read
from
that
I
suppose
is
the
question
where
does
that
sit
in
your
current
thinking?
And
the
last
one
was
on
really
I
suppose
the
number
of
customer
accounts,
I
suppose
particularly
in
Travis
and
BSS,
Keyline
and
CCF. It'd
be useful
to
sort
of
understand
the
sort
of
development
of
the
total
account
numbers
in
those
major
businesses?
Let
me
start
Alan
with
Benchmarx
and
come
up
to
the
General
Merchant
and
then
we'll
come
back
on
customer
gaps.
So,
an
interesting
set
of questions.
Thanks
for
that.
Yeah,
look,
I
don't
think
we
look
to
send
any
signal
with
our
comments
on
Benchmarx.
Absolutely
Benchmarx
is
key
to
our
proposition
and
it
was
really
heavily
laid
out
by
Kieran
at
the
CMU
in
September
how
important
Benchmarx
is.
What
we've
done
with
Benchmarx
as
we
outlined
then
is
integrate
it
within
the
General
Merchant.
So,
we're
actually
putting
it
in
where
it
isn't
present
into
our
new
branches
within
the
General
Merchant
and
making
sure
that
our
trade
customers
who
are
coming
in
for
that
product –
for
a
project
is
a
seamless
integration
with
the
kitchen
that
they
need
if
that's
part
of
the
project.
And
we're
seeing
a
fantastic
response
to
that.
Our
customer
penetration,
which
due
to
lack
of
integration
of
those
two
businesses,
wasn't
where
we
wanted
it
to
be,
continues
to
improve.
And
where
we
have
our
new
destination
branches,
deliberately
building
in
that
Benchmarx
showroom
and
branch
into
the
core
Travis
Perkins
offer
is
proving
extremely
successful.
So
Benchmarx
is absolutely
key.
Not
only
that,
we
are
working
now
with
our
Managed
Services
customers
and
obviously
the
addition
of
the
expertise
from
Staircraft
gives
us
the
opportunity
to
think
about
kitchen
solutions
and
modular
kitchen
solutions.
It's
again
taking
time,
cost
and
complexity
out
of
replacing
kitchen
units
in
social
landlord
units
where
access
is
constrained.
So
Benchmarx
gives
us
a
real
edge
in
that
core
trade
customer
proposition
and
the
integration
of
that
business
with
the
General
Merchant
has
proved
to
be
extremely
successful.
So
we're
really
pleased
about
that.
Your
point
on
price.
I
think
we
outlined
through
2020
and
through
2021
actually
the
changes
we've
made
in
our
pricing
architecture,
much
greater
simplicity,
much
greater
transparency.
You
cannot
have
a
credible
web
offer
or
anything
on
an
app
without
actually
being
competitive
in
your
pricing.
So
many
of
our
customers,
our
regular
customers,
trade
customers
will
have
their
negotiated
pricing
architecture
with
us.
That
will
appear
on
their
app,
and
on
their
account
on
the
website.
But
actually
for
non
– for
non-account
holders
of
which
we
have
many,
you
have
to
be
competitively
priced.
And
I
think
that's
what
we've
achieved
through
our
key
value
item
pricing
as
well
as
our
overall
pricing
architecture.
But
that's
a
story
from
2020
through
2021
as
well.
And
we're
really,
as
I
said,
we're
really,
really
pleased
with
what
we've
seen
through
our
digital
channels.
I mean,
that's
an
investment
we
made
because
customers
want
to
do – they
want
to
have
the
choice.
It's
going to
be
either
or
necessarily
they
want
to
use
both
the
branch
channel
and
digital
channel.
So
actually
having
provision
for
both
is
really
important
to
our
business.
Do
you want
to comment
on
customer
accounts?
So,
Clyde,
I'd
actually
link
in
some
way
the
point
about
the
overall
pricing
architecture
and
the
number
of customer
accounts.
So,
in
essence,
we
saw
the
number
of
accounts
we
got grow
during
2021.
And
the
reason
for
the
linkage
that
I
make,
I
think
it's
fair
to
say
that
by
being
a
price
leader
going
back
to
–
that
was
the
strategy
particularly
around
2005
in
the
General
Merchant.
So,
going
back
many
years,
I
think
it
left
a
sour
taste
or
a
bad
impression
with
some
customers
who
tried
this
again
when
they
were
struggling
for
availability
of
product
last
year
so
that they
could
complete
the
jobs.
They
were
favorably
impressed
that
the
pricing
is
very
competitive
within
the
General
Merchant,
so
we
managed
to
gain
customers
with
cash
accounts
and
convert
a
number
of
those
to
credit
accounts
during
2021
in
the
General
Merchant,
which
is
something
we've
not
done
for
a
while
in
big
numbers.
So,
we're
really
pleased
with
the
progress
that
we're
making
there.
And
Clyde,
you
also
talked about
our
specialist
merchants.
We
got
two
of
our
MDs
in
the
room
here.
We
made
tremendous
progress
last
year
again
and
in
2020
with
simplifying
the
pricing
architecture.
We
made
–
and we
talked
about it at
the
CMU
and
other
presentations
around
the
progress
we've
made
in
simplifying
our
business
by
netting
out
rebates,
for
example,
radically
enhancing
the
kind
of
simplicity
of
the
pricing
architecture
for
our
specialist
merchant
customers
as
well.
So,
progress
made
across
the
board
and
customers
have
really
noticed
it,
so
has
our
competition.
Thanks,
Clyde.
Yeah.
Morning. It's
Sam
Cullen
from
Peel
Hunt.
Also,
I've
got
three
as
well,
although
I
think
two
are
interrelated
really.
The
first
one
hopefully,
fairly
simple
is,
you
mentioned
the
destination
branches
in
TP.
Can
you
give
us
an
idea
of
what's
scope
you
see
for
those
expanding?
What
are
the
realistic
numbers
over
time?
And
then
secondly,
when
you
talk
about
the
average
order
value
and
growing
share
of
wallet
in
Toolstation,
how
are
you
disaggregating
share
of
wallet
versus
just
industry
wallet
increasing
over
the
last
year?
And
a
similar
question
in
terms
of the
maturity
profile
of
Toolstation
that you
talked
about
accelerating
in
the
last
three
years.
How
are
you going
to
split
out
what's
happening
in
that
maturity
profile
because
the
market
has
grown
so
much
in
the
last
18
months
versus
the
network
effect
of
Toolstation
doubling
branches
say
in
three
years?
Good.
Thank
you.
So
we
said
at
the
CMU
that
it's
likely
that
our
branch
numbers
within
the
General
Merchant
will
stay
somewhere
between
550
and
600.
And
we
haven't
changed
that
view.
So
we
are
closing
some
smaller,
more
challenged
branches
because
of
location,
we
want
larger
destination
branches.
We're
opening
new.
Some
we're
repurposing.
So
we
don't
necessarily –
we're
sticking
with
that
sort
of
view
that
overall
the
numbers
will
remain
in
that
range.
Our
focus
though
is
on
getting
these
larger,
more
capable
destination
branches
where
we
bring
higher,
where
we
bring
Benchmarx
and
as
I
said
in
our
new
Swindon
branch,
we
bought
Toolstation
in as
well.
In
March
[indiscernible]
(00:52:34)
next
to
last
year,
we
opened
a
small,
I
suppose
you
could
call
it
small
sort
of trade
location,
trade
parks
where
we
had
TP
alongside
Toolstation
alongside
BSS.
We
know
those
locations
worked
really
well.
They've
become
destinations
for
our
customers
and
that
starts
to
attract
that
opportunity
to
deepen
the
relationship
and
attract
more
share
of
wallet.
In
Toolstation,
we
look
carefully
to
your
point
about
share
of
wallet
at
our
trade
customer
accounts.
That's
where
we're
really
focused,
because
actually
if
we
look
at
the
overall,
we
get
back
into
the
kind
of
comps
with
the
lower
value
purchases
that
we've
seen
through
the
pandemic,
those
DIY
customers,
you
and
I.
And
so,
we
really
see
that
as
we've
enhanced
our
trade
credit
proposition,
as
we've
enhanced
our
app
capability,
project
listings
for
our
trade
customers
so
that
they
can
do
repeat
orders
really
quickly,
enhancing
their
search
capability,
meshing
in
the
trade
credit
clarity
with
the
app,
and
we've
continued
to
enhance
the
trade
relevance
of
our
range
and
the
in-branch
experience,
that's
where
we
see
the
share
of
wallet
going
up.
And
that's
exactly
what
we
want
for those
trade
customers,
as
Alan
said,
those
over
£1,000
a
year
trade
customers,
that's
really
our
key
focus.
And
that's
where
we've
made
some
such
good
progress.
[indiscernible]
(00:53:49)
the
maturity
profile?
Yeah.
On
the
maturity
profile,
Sam,
the
point
that
–
the
good
thing
about
the
Toolstation
business
being
a
very
digital
business
is
we
have
the
history
of
every
sale
from
the
very
first
sale,
and
we
know
the
sales
profile
by
branch
as
well.
So,
we
look
at
the
openings,
and
we
call
them
cohorts
year-by-year,
and
the
simple
point
I'm
making
is
compared
to
the
average
maturity
profile
that
we'd
seen
on
previous
branches,
the
ones
that
we've
opened
in
the
last
three
years
are
very
significantly
ahead,
and
therefore,
we
get
to
a
cash
breakeven
contribution
to
overheads
much
more
quickly
on
the
200
we've
opened
in
the
last
three
years
more
quickly
than
the
previous
330.
I
agree
there'll
be
a
– there
will
be
an
overall
network
scale
effect,
but
that's
the
beauty
of
the
Toolstation
model
in
that
it
– and
why
we're
so
confident
on
hitting
the
£1
billion
for
the
business,
because
you
start
to
get
momentum.
The
more
units
you
have,
the
more
you're
able
to
do
with
trade
credible
products,
expanding
the
SKU
range, the
digital
side
of
the
business,
the
app,
a
strongly
performing
website.
All
of
those
features
build
on
each
other
and
give
you
that
momentum
going
forwards.
And
it's
why
we
can
say
with
confidence
we'll
hit
the
sales
number,
we'll
hit
the
margin
target
that
we've
got
for
the
business.
Thanks.
Thanks.
Its
Priyal here from
Jefferies.
I
think
I've
got
three
questions.
So,
the
first
one,
obviously
you've
talked
about sort
of
supply
constraints
starting
to
ease,
but
are
there
any
metrics
you
sort
of
track
that
help
us to
quantify
this,
things
like
fill
rates
and
how
are
these
progressing
now?
Where
are
they
versus
where
they
usually
are?
And
do
you
sense
sort
of
an
advantage
versus
some
of
the
smaller
independents
on
this
front?
The
second
question,
Nick
I know
you
mentioned that,
actually
most
people
you
sell
into
haven't
been
that
impacted
financially
by
COVID,
but
is
there
any
sort
of
anecdotal
evidence
from
some
of
your
trade
customers
that
maybe
cost
inflation,
which
is
definitely going
to
continue
this
year,
is
starting
to
hinder
some
of
that
demand
even
in
the
short
to
mid-term?
And
then
the
last
question
is
just
the
extra £15
million
that
you're
spending
on
the
fulfillment
center. I mean,
could
we
just
get
a
bit
more
detail
on
that?
I
mean,
what
are you
spending
that
on?
What
does
it
achieve?
Just
sort of
how
revolutionary
is
what
you're
doing
now?
Thanks.
Brilliant.
Thank
you.
On
the anecdotal
evidence,
we
have
undertaken
three
times
last
year,
I
think,
our
RMI
index,
which
we've
made
available
which –
and
Alan
commented
on
this,
where
we
have
seen
–
this
is
a
survey
of
our
trade
customers,
where
we
have
seen
really
no
change
in
their
forward order
book.
So,
typically
they
might
be
out
at
8
or
so
weeks,
8
to 10
weeks,
and
they've
extended
well
past
that
through
last
year
and
they
are
sustained.
Anecdotally,
you
do
hear
some
stories
probably
more
actually
in
the
commercial
or
social
infrastructure
space
where
projects
might
have
been
delayed
for
concerns
around
price
inflation.
That
was
a
feature
more
of
last
summer
when
there
was
so
much
hubris
around
that.
That
we
think
has
settled
back.
Our
forward
order
books
remain
strong
and
we
don't
see
sustained
evidence
or
significant
evidence
of
projects
being
moved
to
the
right
on
the
basis
of
inflation
or
materials
challenges.
So,
Priyal,
on
the
supply
constraints,
the
way
we
measure
this
is
at
availability
measure.
So,
when
the
branch
needs
a
product
from
a
fulfillment
center,
do
we
have
it
in
the
fulfillment
center
or
not?
And
looking
at
that
across
all
the
SKUs
that
we
sell.
And
on
that
availability
measure,
we're
largely
back
to
where
we
were
pre-pandemic.
I
think
there
will
continue
to
be
some
tight
areas
of
supply
during
the
year,
but
I
don't
think
that's
having
an
impact
on
our
customers,
more
on
the
safety
stock
levels
that
we're
carrying.
On
the
incremental
£15
million
of
CapEx,
first
of
all,
the
fit
out
of
the
new
DC
in
terms
of
the
racking
sprinklers,
those
sorts
of
things
is
all
in
the
base
CapEx
and
was in
the
[ph]
£125
million (00:58:38) that
we
outlined
at
the
end
of
September
at
the
Capital
Markets
Update.
What's
different
is
the
incremental
£15
million is
on
various
elements
of
automation
within
the
warehouse.
So
this
is
a
warehouse
where
we
will
be
picking
individual
items
and
boxing
those.
So,
its
conveyors,
its
boxing
equipment, automation
of
that,
automated
guided
vehicles
to
collect
the
product
from
the
racks,
take
that
to
picking
areas.
The
reason
we're
doing
that
is
to
put
ourselves
in
a
position
where we
can
manage
the
cost
better
going
forwards,
quite
simply.
So, it
will
be
around
three-year
payback
on
the
equipment.
It
helps
you
from
a
labor
efficiency.
And
we
all
know
that
labor
within
the
distribution
space
is
quite
tight
in
the
UK
at
the
moment.
So,
I'd
describe
that
as
absolutely
future-proofing
the
facility
that
we're
putting
in
place.
Now,
my learned
colleague,
the
Finance
Director at
Toolstation,
Richard,
would
tell
me
that
the
technology
that
we're
using
is
Volkswagen
Golf
type
technology.
This
is
not
leading-edge
technology
by
any
means,
so
we're
not
building
a
very
advanced,
I'm
saying
it's
all
tried
and
trusted,
solid
German
and
Swiss
engineering
that
we'll
be
using.
Thank
you
very
much.
Good
morning.
Arnaud
Lehmann
from
Bank
of
America.
I've
got
four,
but
they
are
short.
Do
you
promise,
Arnaud?
I
promise.
Firstly,
just
can
you
confirm
that
the
business
trends
you've
seen
in
January
and
February
are
consistent
with
Q4
and
give
you
this
confidence
into
growing
top
line
and
profits
in
2022?
Secondly,
could
you
– I
mean,
you
are
talking
about
gaining
share
of
wallet.
I
believe
that
was
about
Toolstation,
but
I
think
in
TP,
you
were
also
talking
about
getting
market
share.
Can
you
comment
about
the
competitive
environment,
what
you're
seeing
at
the
likes
of
Selco,
Buildbase,
Jewson,
et cetera?
Are
they
on
track
as
well
as on
the
pricing
and
value
creation
rather than
chasing
volumes?
Thirdly
on
debt,
I
think
your
net
debt
position
including
lease
liabilities
at
the
end
of
December
is
broadly
consistent
with
what
we
saw
back
at
the
end
of
June
[ph]
600-plus (01:01:13).
I
was
hoping
for
maybe
a
bit
more
free
cash
flow
generation
and
being
able
to
bring
the
debt
position
a
bit
lower
December
versus
June.
Was
there
any
one-off
to
think
about
in
the
cash
flow
statement?
And
lastly,
property
profits.
You
spent
2021
increasing
the
guidance
and
eventually
beating
your
own
guidance
at
the
end.
Are
there
any
particular
projects
we
should
have
in
mind
that
could
imply
upside
to
your
2022
property
profit
guidance?
That's
it.
Good
Arnaud.
Let
me
take
the
first
two
Alan
and
then
we'll – sort
of
you
know why
we
don't
we comment
on
January
and
February
and
we
just
closed
our
books
last
night,
February.
But
as
we've
said
in
the
statement,
positive
start
to
the
year,
confident
for
2022.
So,
I
think
I'll
leave
at
that.
On
our
– lots
going
on
in
the
competitive
environment
in
2021.
I'm
sure
you
have
dived
into
our
competitive
results
that
one
of
whom
obviously Selco came
out
last
week.
[indiscernible]
(01:02:22)
how
they're
getting
on.
Our
view
is
that
we
are
gaining
share
and
performing
very
positively
around
those
respective
competitors.
But
our
side
by
side
against
some
of
our
key
competitors,
as
much
as you
can
dig
into
their
figures
some
times,
to
separate
out
those
businesses
indicates
that
we're
making
really
good
progress.
So,
we're
very
positive
around
that.
We
think
we're
doing
all
the
right
things
on
our
strategy
focusing
on
deepening
that
relationship.
And
then
really
you
talked
about
you used
the
word
value
creation,
I
think
when
we
look
at
how
we're
elevating
our
relationship
and
adding
services
and
solutions
around
our
core
offer, we
really
are
at
the
forefront
of
that
in
our
space.
So,
we're
very
positive
around
the
strategic
progress
we've
made.
Debt,
Alan?
Yeah.
So,
on
the
net
debt,
Arnaud,
there
aren't
any
particular
issues
that
I'd
draw
your
attention
to.
We
did
end
the
year
with
more
stock
in
terms
of
volume
not
just
a
price
impact.
Some
of
that
was
anticipating
some
of
the
availability
challenges
that
we
saw
last
year
and
making
sure
that
we're
well-stocked
on
Keylines and
within
the
General
Merchants
in
particular,
but
there's
nothing
particular
that
I'd
draw
your
attention
to.
A
lot
of
that
is
funded
by
the
trade
creditors.
So
I
think
it
would
be
more
in
the
–
the
key
thing
is
the
increasing
working
capital
of
£150 million
in
the
year
was
all
about
the
trade
debtors.
When
I
look
at
the
trade
credit
book
in
terms
of
days
of
sale,
overdues
as
a
percentage
of
the
debt,
they're
all
at
really
good
levels.
So
I
said
during
the
comments
earlier,
record
lows
on
the
level
of
overdues.
So
there's
nothing
I'd
draw
your
attention
to
that stands
out
in
there.
On
the
property
profits
for
last
year,
first
of
all,
why
did
we
up
the
guidance
to
at
least
£40
million?
Well,
it's
because
we'd
started
marketing
the
Tilbury
distribution
center
and
we were
confident
on
getting
a
transaction
done
in
the
year.
Why
did
it
come
in
at
£49
million?
Well,
we
got
more
for
that
property
than
I
thought
we were
going
to
get,
a
lot
more, and
hence
the
outturn
that
we
had
on
the
year.
The
£25
million
for
this
year,
they
are
very
specific
projects.
It's
always
difficult
to
predict
exactly
the
flow
of
these
things.
But
I'm
confident
that
that
£25
million
of
projects
will
be
there.
If
there's
any
more
that
come
along,
I'll
give
you
good,
early
notice.
Sounds
good.
Thank
you
very
much.
Charlie.
Yes.
It's
Charlie
Campbell
at
Liberum.
Just
two
really
for
me,
please.
Just
–
first
of
all,
just
on
Toolstation,
I'm
thinking
about
the
profile
of
margins
as
the
business
matures.
It
does
sound
to
me
from
the
presentation
today
as
if
actually
trade
might
end
up
being
a
bigger
percentage
of
Toolstation
UK
than
you've
previously
thought
which
is
probably
helpful
for
margin.
So,
I
just
wonder
if
you
–
this
is
the
right
time
to
be
thinking
about
margin
at maturity
being
a
bit
bigger
than
previously
expected
or
perhaps
that story
has
got
bit
longer
to
run.
And
then,
secondly
on
Toolstation
again
on
the
UK
business.
Glad
to
hear
that
this
Volkswagen
Golf technology
in
there.
Is
the
installation
of
that
all
outsourced?
Just
again
to
get
an
idea
of
the
risks
to
that
project.
Automated
system
sounds
quite
risky
to
me.
But
just
on
thoughts
on
mitigation
of
the risk
of
that
program.
Yes.
So,
Charlie,
just
starting
with
that
one.
The
installation
is
outsourced.
We're
working
with
a
partner
to
manage
all
the
different
contractors.
We
also
have
a
failsafe
mechanism
and
that
is
a
warehouse
that
can
be
operated
manually
if
needed
as
well
as
having
the
automation
there.
On
the
Toolstation
margin
maturity,
I
think
you're
right
that
trade
will
be
a
significant
proportion
of
the
business.
In
my
mind,
we'd
always
anticipated
that
and
that's
reflected
in
the
range
of
products
that
we
stock
and
getting
into
more
and
more
trade
credible
ranges.
I
think
it's
a
little
early
to
start
calling
margin
could
be
bigger
than
expected.
And
the
other
point
I'd
point
out
is
that
we
do
maintain
a
fairly
healthy
price
advantage
versus
the
competition
within
Toolstation.
And
we're
very
keen
on
keeping
that
because
that's
one
of
the
things
that
our
customers
love
about
the business.
And
just
as
a supplementary,
has
the
take
up
of
trade
credit
not
surprised you? I
mean,
that
was
sort
of
a
message
it
seems to
have
come
out.
I
mean,
perhaps
I'm
over
reading
that.
I think the
trade
credit
is
going
really
well.
It's
always
difficult
when
you've
not
done
it
before
in
a
business
like
that
to
know
quite
how
it
will
take
off.
But
we've
automated
the
process.
It's
actually
another
area
of
collaboration
between
the
TP,
General
Merchant,
and
Toolstation
that's
in
place
in
that
it's
the
TP,
General
Merchant
credit
team
have
helped
put
that
automation
and
process
in
place
for
the
Toolstation
business
to
accelerate
qualifying
customers
for
credit.
So
it's
going
–
at
this
stage
it's
going
really
well.
Still
small
overall,
but
really
promising.
Thank
you.
Jon
Bell
next.
If
we
could
bring
the
mic.
No?
No,
Jon.
[indiscernible]
(01:08:15).
Matt,
as
we
got
a
couple
of
minutes
left,
are
there
any
more
questions
in
the room?
We've got three on
the phone lines on
the
conference call.
Would
you
like
to
take those?
Yeah.
[indiscernible]
(01:08:25).
[Operator Instructions]
And
we
will
take
our
first
question
from
Rajesh
Patki
from
JPMorgan.
Yes.
Hi.
Good
morning,
everyone.
I
hope
you
can
hear
me
well.
Yeah.
Hello?
We
can
hear
you,
Rajesh.
Go
ahead.
Hello.
Can
you
hear
me
well?
Yeah.
Rajesh,
go
ahead
if
you
can.
Thank
you.
Yes.
I've
got
two
questions.
First
one
is
on
the
Specialist
Merchanting
business.
You
mentioned
record
profit
delivery
for
BSS
and
Keyline.
Just
wondering
if
that
is
largely
due
to
better
margins
this
year
or
is
the
top
line
for
each
one
of
those
businesses
ahead
of
the
2019
level
as
well?
And
the
second
one
is,
I
think
you
touched
upon –
briefly
on
the
second
half
performance,
but
if
you
can
add
some
color
on
how
you're
thinking
about
the
working
capital
moves for
this
year,
that'll
be
great.
Thank
you.
Okay.
Rajesh, its
Alan here.
So
on
the
second
half
performance
and
the
outlook
on
working
capital,
I
think
working
capital
as
a
percentage
of
sales
or
on
a
DSO
basis,
I'd
expect
to
see
broadly
consistent
with
2021.
I'd
actually
suspect
there'll
be
a
little
reduction
on
that
basis
of
percentage
of
sales
in
the
Merchanting
business,
which
will
help
us
from
the
continued
expansion
on
Toolstation.
In
terms
of
the
Specialist
businesses
and
BSS
and
Keyline
in
particular,
certainly
on
a
two-year
basis
if
you
look,
they
were
growing
they're
like-for-like
sales
healthily.
The
gross
margins
were
really
solid
in
both
businesses.
But
one
of
the
points
I
highlighted
was
the
efficiency
within
those
businesses,
namely
having
closed
some
branches
during
2020
which
were
lower
than
the
average
revenue
and
difficult
sites
to
operate.
We've
managed
to
effectively
recover
volumes
without
adding
back
as
much
operating
cost
into
the
business.
So
we
saw
an
improvement
in
the
overheads
to
sales
ratios
in
the
businesses
as
well.
That
was
across
the
three
Specialists.
And
I've
no
doubt
if
we
hadn't
been
held
back
by
availability
challenges
within
CCF, we
would
have
seen
a
similar
pattern
given
the
improvement
that
we
made
in
the
network
during
2021
– sorry,
2020.
Thank
you,
Rajesh.
We
have
time
maybe
for
one
more, Matt.
Thank
you.
Yeah.
One
more,
please.
And
we will
take
the
next
question
from
Ami
Galla
from
Citi.
Thank
you,
guys.
Just
a
few
questions
from
me.
First
one
is
a
follow
up
on
Toolstation.
Could
you
give us
some
sense
of
the
possible
timing
of
the
direct
fulfillment
center
reopening
up?
And
in
terms
of
Toolstation,
where
does
the
online
mix
in
the
business
currently
sit?
And
do
we
expect
that
to
increase
over
the
next
couple
of
years
as
you
kind
to
use
the
fulfillment
center
in
that
regard?
My
next
question
was
on
Staircraft.
You've
been
given
– you've
given
a
reasonably helpful
guide
in
terms
of
the
sort
of
house builders
that
you're
working
with.
Is
there
a
number
that
you
can
give
us
in
terms
of
the
average
number
of
sites
that
Staircraft
is
currently
being
used
on?
And
the
last
one
is
just
a
follow
up
on
the
working
capital
flows
for 2022.
Do – is
this
sort
of
level
of debtors
in
the
business
at
the
right
level
or
should
we
see
further
investment
in
that
regard
going
forward?
Thank
you,
Ami.
Let
me
start
and
Alan
will
pick
up.
If
I
heard
you
rightly,
the
timing
for
the
DC
is
back
end
of
this
year
and
into
early
next.
And
the
online
mix,
we
haven't
set
necessarily
a
target
for
that,
it's
just
a
huge
opportunity
for
us.
And
through
really
driving
the
quality
and
capability
on
our
online
channel
as
well
as
the
app
channel,
there's
just
a
great
opportunity
for
growth
and
we've
been
really
pleased
by
the
positive
uptake
and
performance
so
far.
Staircraft,
I
have
to
come
back
to
you on
the
number
of
sites
specifically.
I
mean
as
I
said,
we're
working
with
all
the
top
house
builders
and
growing
that
business
extremely
positively.
So,
we'll
just
have
to
respond
to
you on
the
number
of
sites,
I'm
not
sure.
No,
no.
Okay.
And
then
on
the
question,
Ami,
around
working
capital
and
trade
debtors,
is
it
at
the
right
level?
I
think
if
you
look
at
the
trade
credit
as
a
percentage
of
Merchanting
sales,
the
trade
debtor
book
that
gives
you
a
very
good
indication
of
where
we
are
on
the
business.
And
as
I was
at
pains
to
point
out
now
for
the
third
time
of
asking
record
low
overdues
as
a
percentage
of
sales
within
the
business
as
well.
Just
on
Staircraft,
Ami...
Thank
you.
...our
opportunity
here
extends
way
beyond
the
large
house
builders
who
are
very
important
customers
to
us
for
Staircraft
and
the rest of
the
business.
But
actually
the
opportunity
to
grow
that
business
into
our
regional
and bespoke
house builder
cohort
is
really
exciting
for
us.
And
so,
we
move
beyond
the
traditional
names
that
you
and
I
will
know
and
love
and
into
a
group
of
customers
that
actually,
in
aggregate,
exceed
the
demand
of
the
large
house builders.
So,
it's
a
really
exciting
opportunity
for
us
to
grow
our
Staircraft
business.
Thanks,
Ami.
I
think
we
are
absolutely
on
time.
So,
thank
you
so
much
to
everybody
on
the
webcast
and
for
those
who have
asked
us
some
questions
and
everybody
in
the
room.
It's
been
a
fabulous
year
for
us
and
one
that
we're
extremely
proud
of.
The
business
is
incredibly
confident,
and
we
look
forward
to
2022,
and
we
look
forward
to seeing
you
again
soon.
Thank
you
very
much.