Hi, good morning everybody and welcome to the results presentation for the half year for Travis Perkins. For anyone who doesn't know me, I'm Gavin Slark, I'm the CEO, and I'm joined today by Duncan Cooper, who is our CFO.

The agenda for this morning is relatively straightforward. I will just give you one slide of a few headlines.

I'll then pass over to Duncan to take you through the financial review. I will then come back up and just give you a brief overview of where we are with the various businesses.

Then that should leave us some time for some Q&A and I'll talk you through the process for the Q&A as we go through later on. In terms of the results that we've announced this morning, obviously you'll see their revenue at £2.258 billion, down 1.8% in absolute terms.

A chunk of that is down to the sale last year of the Staircraft business, and then from a like-for-like perspective, our overall turnover was down just 0.7%. You'll see there also on the gross margin line, we've improved gross margins by 100 basis points.

As some of you will remember when we announced the full year results earlier in March, we did talk about gross margin expansion being critical for the future success of the business, and Duncan will talk a little bit more about that later on. In terms of the adjusted operating profit, up by 6.3% to £67 million.

I think one of the standout headlines in terms of the results this morning is where we are in terms of net cash before leases. You'll see there that we now have net cash before leases of £55 million compared to £103 million at this point last year.

A £158 million improvement in 12 months on where we were, and also a £51 million improvement on where we were in March compared to the year-end. I think one of the things that we've got there is a really strong financial underpinning that should give our colleagues, our customers, and our suppliers a lot of confidence in Travis Perkins looking forward.

To take you through the detail of the numbers, I'll pass over to Duncan.

Good morning, everyone. Thank you, Gavin.

I'll start with the usual financial overview. Group revenue of £2.3 billion, down 1.8% on prior year in what remains challenging trading conditions.

Adjusted operating profit before property profits in line with prior year at £62 million, and including property profits up 6.3% to £67 million. That gives an adjusted earnings per share of 15.1 pence per share, up 13.5% on prior year.

That's a higher relative increase than the profit because of the phasing of the higher property profits in H1 and the lower finance costs incurred in the half as a result of us holding higher cash on deposit balances. Net cash at the half was £55 million, as Gavin said, £158 million pound improvement from the June 2025 net debt position of £103 million, and up from the £1 million net cash position we reported at year-end, representing further evidence of the strong cash focus we've had in the group over the past couple of years.

Accordingly, leverage drops 20 bips from year-end and 40 bips from June 2025 to 1.9 times and returns to within our desired range of 1.9 1.5 to 2 times. Finally, the board is recommending an interim dividend of 4 pence per share in line with our prevailing dividend policy and payable on the 6th of November this year.

On the next slide is the revenue walk for the year, and this simply reflects what you can read for yourselves in the latest CPA report or any other widely available market commentary. January and February construction output was impacted by poor weather across all projects.

RMI activity remains heavily confidence-linked, with the bond markets now forecasting two interest rate rises for Q3 and Q4, as opposed to two decreases at the start of the year. New house building activity has stalled, new land acquisitions have dried up as house builders are seeking to preserve cash, rendering the 1.5 million homes in this parliamentary term redundant.

Finally, infrastructure is generally a little stronger, but remains lumpy. With another cabinet reset and departmental reviews no doubt underway, there probably will need to be some tough decisions for the Prime Minister to make to fund some of the recent priorities.

All of this continues to weigh heavily on volumes and activity levels. Against this backdrop, pricing has become a critical issue.

We outlined to you in March that we had proactively increased prices at the start of this year to protect gross margin. The Iran war then necessitated us passing a further round of manufacturers' price increases on shortly after it started at the end of February.

Some of these increases arrived within days of the conflict starting, initially linked to an anticipated increase in freight costs, and then later where oil is a principal constituent of the product itself. Some of these increases have been significant, such as 15 to 20% on oil-based plastic products, and we would expect a second wave of increases to come through in H2 and H1 next year as hedges for natural gas and oil roll off elsewhere.

We are inevitably trying to pass on these increases in full, and are generally doing so very successfully, but in turn it is difficult to assess what impact this is having on demand. Within this backdrop, we're also consciously walking away from low-margin or loss-making transactions, and continue to scrutinize credit limits and overdue debt positions very carefully.

Nearly 4,000 construction firms became insolvent in the UK in the year to April 2026, and that rate is sadly increasing. We could undoubtedly drive our sales line harder by taking more bad debt risk, but this is a constant judgment call as entering into fixed-price contract work is, too, in an inflationary environment.

Notwithstanding my comments on pricing so far and low-margin transactions, we are still steadily recapturing share in the general merchant, which highlights that with good execution, it is possible to grow share and protect profits in this market, and Gavin will talk to you about that more in his section later. Finally, the disposal of Staircraft, as Gavin outlined, last year also contributes to the bridge on this slide.

Let me now cover the profit walk for the year. I'll start by repeating something I said at the year-end, if I may.

We, along with every other materials distributor in the UK, employing a large workforce and carrying a significant rent bill, need to deliver gross margin expansion to help cover the cost of doing business in the UK. This is following the past two years of higher global inflation and the increased burden of employment-related taxation.

The good news is, we have managed to achieve this in H1, and it has helped stabilize overall profitability. Our gross margin has improved because of a variety of factors, but I would pull out three.

Firstly, we've had a relentless focus on passing through price increases and not discounting unnecessarily. Secondly, our sales mix has consciously shifted.

We've been comfortable to walk away from some lower-margin direct sales, and instead focus on higher-margin yard sales where availability and service are more important differentiators. Thirdly, we've undertaken a huge amount of work in the past 12 months doing what I would describe as good old-fashioned category management to support our COGS position: driving greater collaboration with our strategic suppliers on improved terms, harmonizing purchasing terms across the group, stopping purchasing from our direct competitors, and removing nearly a fifth of our tail merchanting suppliers.

Given our size and scale, we have a huge opportunity to do more here in the future as we continue to professionalize how we buy, for example, how we leverage our Far East sourcing office more effectively across the group. You can see that gross margin improvement has been needed to help mitigate the impact from cost inflation presented on the next two bars.

I outlined at prelims that we would expect to see around £40 million worth of cost inflation this year, and around half of that is in the bar on the graph, with the balance subsumed, netted off within Toolstation UK. The £6 million cost reduction is a half-year effect of the restructuring activity we undertook in 2025, as well as further efficiencies we have identified during this year.

All business units and central functions cost centers are running favorable to budget as we look to deliver further efficiencies in the way we operate in tough market conditions. The final bar reflects property profits, and I'll come back to our property portfolio later.

The next slide is the cash flow for the half, and this is a continuation of the efforts of the past two years, focusing on delivering further efficiencies that lie within our gift and being disciplined on cash outflows. Many of these items are in line with prior year, but I'll pull out three.

In working capital, we've made further good progress with our suppliers in harmonizing terms and driving procurement gains in the process. Debt collection remains a key focus, and we've done a good job across the group.

As with stock, this will be a key focus for the second half, and I think we can still do more here. From a capital expenditure perspective, we're clear the number can and should be lower than it has been in previous years.

It also needs to be targeted into different areas and types of spend. Of this year's total forecast, nearly half will go into renewing our fleet and bringing down its average age.

The balance sits across investment in the merchanting estate, specifically the older General Merchant branches, and rolling out Toolstation UK stores, which we want to accelerate towards our 650 target. Small amounts of sensible investment directed at roof repairs, yard resurfacing, colleague welfare facilities, etc., can make a massive difference to the customer and colleague experience, and we are starting that refurbishment agenda.

The group has historically spent significant sums of money relocating branches entirely. Rarely have the economics of that investment returned in line with original expectations, and in this market context, expensive relocations make no sense.

Finally, we generated £70 million of net property receipts in the first half, and I want to talk a bit more about how we think about this. As part of the usual housekeeping of a large branch network, we have closed 10 merchanting branches in the first half.

Most of these are either benchmarks or managed service-specific branches, or located in rural communities where, regrettably, the economics of extending the lease or making capital investment to refurbish these branches didn't make sense. The sale of these sites and surplus-to-requirements development land generated most of the group's property receipts in the first half.

We may also see opportunities to realize value from the property portfolio where location is less relevant for product that is typically delivered rather than collected, and where capacity levels are forcing us to look at self-consolidation of our estate. What we are not looking to do, to be clear, is widespread sale and leaseback transactions of our best sites in the best cities in the UK, or even outright sales.

We don't need to do this to raise cash. We can candidly borrow money more cheaply if we needed to, and it's ultimately value-destructive over the medium term.

When those lease breaks arise, we would simply lose our prime sites and never get anything remotely comparable to them to replace them. Let me just very quickly summarize how these cash actions impact the balance sheet.

Net debt reduces to £543 million, with net cash before leases at £55 million. This brings our leverage, net debt to adjusted EBITDA down to 1.9 times, which is back inside our desired range of 1.5 to 2 times for the first time since 2022.

This fulfills a commitment we made in January 2024 to return the group to this range as soon as it was practical and sensible to do so. A listed group of our size and prominence should be deemed to be consistently investment grade when it comes to raising finance in the public markets, and the future rebuild of this group requires the foundations of a strong balance sheet financed by a competitive rate of borrowing.

Let me summarize before handing back to Gavin. We expect the market to remain challenging in the second half, but it is possible to trade smart, take share, and protect profitability, and we will continue to keep a tight grip on costs and cash at all times.

In terms of guidance, we expect a group effective tax rate for the year of 28% on UK-generated profits, base capital expenditure should be between £60 to £70 million for the year, and we expect property profits for the full year to be around £5 million, recognizing this has already been achieved in H1. Finally, we are expecting a similar market backdrop for H2 as H1, and therefore expecting a similar trading performance.

With that, I will hand you back to Gavin.

Thanks, Duncan. Some of you will recognize this slide from the full year presentation that we gave in March when we started talking about the business in three tiers.

It feels appropriate to use this slide again just to sort of steer us through the next few slides. Just to be clear, going forward we may not always talk about every business at every presentation, but I think today it just still feels appropriate to do that.

In terms of Travis Perkins, Green & Gold, General Merchanting, obviously the biggest business that we have within the group, and even though we don't separate out the individual performance numbers for each of the businesses, what I would say is that Rich and his team in the first half of this year have delivered a mid-to-high single-digit percentage profit improvement within Green & Gold. One of our key targets in seeing traction within the Green & Gold business, we absolutely have developed as we've gone through the first half of the year.

The gross margin expansion through inflation pass-through, as Duncan just talked about, looking at things like sales mix, looking at the way that we procure. What I would say is, as a group, we're now set up and we're structured in a more sensible way to make this work as we go forward.

Capital expenditure: we will have spent this year something in the region of £30 million in renewing the fleet within the Green & Gold business. As Duncan just said, also significant CapEx now committed in terms of improving, refreshing, and renewing the branch infrastructure that we have across the Green & Gold business.

We have streamlined and more focused the management team within that business, with everybody within Green & Gold reporting directly into Rich. It gives us shorter management chains, it gives us more agile decision-making processes, and I think sets us up as a much more agile business going forward.

The start of lightside procurement synergies with Toolstation UK. I appreciate some of you may look and say, "Well, Toolstation and Green & Gold have been in the business together for quite a long time.

Surely you're beyond the start of this." I think with where we are now, we're really understanding the strength in collaboration between those two businesses, where they sit within the group, and the benefits that we can derive from working with both Toolstation and with Green & Gold on those lightside procurement opportunities.

Rich and his team in Green & Gold, Lakhvir and her team in Toolstation really understand the power of that collaboration. I think with the General Merchant business, what I would say is, look, this isn't a silver bullet solution in terms of improving the performance of Green & Gold.

The fact that we're seeing the profit move forward, the fact that we're seeing the gross margin move forward, I think this is now an accumulation of a number of different efforts across that business that gives us a lot of confidence going forward. In terms of Toolstation UK, performance remains absolutely in line with where we expect that business to be.

We've now got over 900,000 Toolstation Club members. Club members are important to us because actually when you look at the loyalty we get from club members, you tend to get a higher spend, higher degree and share of wallet from those customers, they tend to spend more, the basket size is bigger, the margin is more attractive.

Also it gives us access to great customer data, which helps us to shape the business going forward, which is also very important for us going into the future. As Duncan mentioned, the Far East sourcing office, I think this year we're celebrating 15 years of having a Far East sourcing office within the Travis Perkins Group, but I think it's fair to say that all of us collectively across the group leadership team believe we haven't really made the most of that team.

We've got some really good people over there, they've got some really good category plans, and I think we can really start to exercise that as we move forward. Certainly within Toolstation, which has got some fantastic distribution facilities, that gives us the opportunity to really start to look at how we can benefit from those really good distribution facilities across different parts of the group, specifically when you look at Green & Gold and distributing into their branches, and also with TF Solutions, which I'll talk a little bit more about later.

TF Solutions is a relatively small business, only has 14 branches in the UK, but if we can utilize the branch network of Toolstation for the distribution of that product as well, suddenly you've got approaching 600 distribution points as opposed to 14. The store number commitment in terms of Toolstation UK, we expect over the next 3 years to move that branch portfolio from 590 up towards 650.

Myself, Lakhvir, the team, we believe that 650 is the right medium-term target to get to. That will include a few more of our Go branches.

The photograph that you can see there is Toolstation Go, which is in Battersea. Certainly within London, we think there's great opportunity for developing that Go concept, which has a lower number of SKUs, but really focuses on the fast-moving higher-margin products that we have.

Staying on Toolstation just a moment, on Benelux, we spoke quite a lot about Benelux when we announced the full year results. We announced that we would carry out a strategic review.

That strategic review has been completed. I think it's fair to say now that we're into discussions with a number of third parties relating the future ownership and status of Toolstation Benelux.

I'm sure that you can appreciate those discussions are confidential, they are commercially sensitive, and I'm not going to get into any detail around those discussions today. As soon as it's appropriate to do so, I will give you a further update on where we are with Toolstation Benelux.

In terms of BSS, obviously as many of a business that I know very well. I think we've got some significant opportunities in BSS, and it's a really interesting business in terms of where we're seeing growth come through.

The private label opportunity in BSS is real. We have a really strong private label, which is called BOSS.

BOSS accounts for about 10% of the turnover within BSS. Obviously with private label, you tend to get a greater margin opportunity as well.

With BOSS, it's a technical brand, this is not a low-cost, kind of cheaper than everybody else product. BOSS is a high-quality technical brand within BSS, and it's actually been the private label within BSS for over 100 years.

It's a real opportunity for us as we go forward. We have got two separate distribution points within BSS, one at Magna Park near Lutterworth in Leicestershire, one at a place called Cross Point, which is in Coventry.

We've operated those two distribution centers quite separately. The product is very different, the vehicles are very different, but we have seen opportunities for logistics cross-docking there, and that's certainly bringing some cost and margin benefits as we look at BSS as a business.

We do see expansion opportunities going more into the commercial, the industrial, and the infrastructure sector, and they are definite growth opportunities as we go forward, along with driving growth in things like commercial air source heat pumps. This is a developing and evolving business, but certainly a true specialist.

Expanding into collaboration with Tier 1 contractors onto major projects. When you look at things like prisons, what we've done here, we have an on-site facility in a secure environment that gives us exclusivity on this particular project.

This is an area where BSS has got real history of proving that we can make these things work. We did it with Terminal 5, we did it with the Olympic Stadium, and we see this as a real opportunity for us going forward in providing a unique facility for the Tier 1 contractors who are working on those facilities.

Keyline, as is our civils and sort of infrastructure business. Strong inflation in this particular product sector as we went through the first half, as Duncan mentioned, particularly on plastics where you've got oil-based pricing.

I think it's also fair to say that within Keyline, historically it's been reliant on the residential new build sector, and you don't need me to tell you how difficult the residential new build sector has been. We are exploring opportunities in the utilities, in infrastructure, and data centers.

We're seeing some early traction there, really encouraged by how we see that going forward. Particularly in this business, we do need to make sure that we keep that really disciplined focus on costs and on working capital.

I think with the team that we have in this business now, we're really well placed for the recovery. It's also important to recognize that in this business, over 95% of what we sell is delivered either by ourselves or directly by the manufacturers.

I think in terms of the infrastructure within our own business, we're building a lean business that we believe will be really well placed as and when we see volumes recover within this particular sector. CCF, I think we have to say that our performance in CCF has deteriorated since last year.

It's another business that historically has been very highly reliant on residential new build, but we are holding market share. As Duncan mentioned earlier, we are being quite choosy here in terms of the margin levels of business that we are prepared to accept, and also paying really close attention to the credit limits and the credit viability of some of the people that we're dealing with.

The slowdown in residential new build, particularly in high-rise within the Southeast, has been a real challenge within this business. We have identified actions that we can take.

We have decided to look at the branch network, to look at the logistics efficiencies, how we can make the supply chain work better. I think Chris and the team in CCF were all completely bought into this particular category is critical to UK construction in the long term.

It's a category that we absolutely should be a major player in, and we just need to make sensible business decisions and devolve the model so that we can participate in this particular sector, but make better returns on this going forward. TF Solutions, our air conditioning and refrigeration business.

It's fair to say market conditions have been relatively friendly towards the air conditioning business in recent weeks. In case anybody hasn't noticed, it's been relatively warm.

I think it's fair to say that right the way across TF Solutions, whether it's in the air conditioning specific or refrigeration, gas installation markets, all of these have been really positive as we go forward. The digital catalog that I spoke about at the full year is now live, and we will also be opening our first TF Solutions branch within the BSS business in Dublin in the first half of next year.

That'll be the first move of putting TF Solutions into Ireland. It's the perfect opportunity to do it.

We're relocating the BSS branch in Dublin to a much better facility, and absolutely lends itself to TF Solutions going into there. We do believe that the air conditioning and refrigeration climate control market has really strong potential going forward, but please remember we are building from a relatively small base.

I think James and his team within TF Solutions also relatively happy and probably come as no surprise that the month of July was an all-time record month for them in terms of sales of air conditioning. I think in terms of summarizing where we are, as Duncan said, a very strong cash performance, which kind of underpins both flexibility and resilience in the market going forward.

I personally believe that a really strong balance sheet in a market that still has some uncertainty is a really strong and positive place to be. We talked at the full year about having a disciplined approach to costs, to margin, and to capital allocation.

We will continue to make what we believe are sensible business decisions in those areas to make sure that we retain that discipline going forward. We absolutely believe there are further opportunities for self-help.

There are things that we can do to improve operational efficiency, there are things that we can do to drive productivity, there are things that we can do to manage our supply chain better, both in terms of physically managing the supply chain, but also in terms of utilizing the procurement skills that we have across the group. Recognizing the market being difficult, we still believe there are things that we can do within Travis Perkins to make the business better, to make the business stronger going forward.

As I mentioned in March, we put a completely new group leadership team in place, the majority of whom are in the room with us today. That team is now fully established, it's developing well.

I think it's fair to say that we've got a team now that have all of the arrows pointing in the same direction. Everybody understands that the part that they have to play, and the part they have to play not just in managing their own specific business, but also in developing the group and making the group stronger.

I think our market-leading positions that we have within those businesses, the vast majority of which are either number one or number two in their chosen markets, gives us a lot of confidence as we look forward and say, we know we're in a strong position, we know we can continue to improve the quality of the business and run the business in a better way. Although the market has its challenges, we are still operating in a large market.

There is still profitable share that we can go for, we can still build margins, we can maintain the discipline on costs, and certainly with that strength of balance sheet, I think it's fair to say we feel that we can face anything that the market's going to throw at us going forward with a lot of confidence. We can make sure that Travis Perkins continues to improve, to grow, and to develop as we go forward.

That concludes the presentation for this morning. We are going to move into Q&A.

As we have got people following on a webcast as well, what I would say is if you've got a question, if you could raise your hand, we'll bring the microphone to you. If you could give us your name and the organization you represent and then ask your question, that will help us to get through the Q&A without too much mayhem breaking out within the room.

If we come right down to the front to start with Charlie down on the front row, that will give you time to get and we can hopefully answer Charlie's questions in an intelligent and articulate manner.

I hope the questions are intelligent and articulate as well. It's Charlie Campbell at Stifel, thank you.

Is that on?

Go on, we can hear you.

Thanks. Thanks, sir.

Just couple of questions. Firstly on us working now on price.

I know there's lots of moving parts, but just to give us an idea of if things stay where they are now, what sort of price component we should be thinking of in terms of the second half, particularly in merchanting, let's say. Then secondly, on the gross margin and also working capital, it seems to me, or we could argue looking from the outside, that maybe some of the rebate structures have changed, and I guess manufacturers have got lots of spare capacity in a way that they didn't a few years ago.

Just wondering if those rebate structures have changed, and also whether you think there's more for that to go where that came from? Thank you.

I'll pick up on price, I'll let Duncan pick up on kind of working capital and rebates and so forth. We saw a lot of price inflation earlier in the year.

I think as we said when we did the full year results, some manufacturers were literally putting price rises through within hours of the issue in the Middle East breaking out. I think we've been more disciplined within the business in passing those price rises through, and I think it's really important that we do that.

I would say literally, Charlie, over the last few weeks, the pricing environment from the manufacturers to us has been a little bit more stable. We haven't seen sort of more price rises coming through.

The price rises that are hitting us mid-year were fairly well telegraphed earlier in the year. I would expect to see a little bit more of the same as we go through the second half.

Obviously, there are so many sort of pressure points in the world that actually I can't rule out that we suddenly get another rise of price rises coming through from the manufacturers. What I can say is, if we do get more price rises coming through, we will actually employ exactly the same disciplined approach in passing those price rises through our supply chain.

The difference in the various businesses of the speed of getting the price rises through is also an interesting point. If you look at Green & Gold where we've seen significant progress, we can get the price rises at the trade counter through very, very quickly.

If you look at businesses like CCF and Keyline in particular where you are on to much more project-based work and long-term project-based, it takes longer for those price rises to work through those project-based customers. I think whatever we see in pricing, I think the mindset that we have within the business now, the discipline that we've shown on pricing will continue through the second half.

Charlie on rebates, I think the answer is some and some. It depends really on which suppliers and which categories.

I think there's been a general, but not that far, drift into more into COGS in terms of less rebate generally over the last few years. I think we've probably just become, as well, more kind of hungry and focused around closing down and collecting rebates and managing that accordingly.

I wouldn't say it's changed dramatically, in all honesty. I think it's pretty stable in terms of how we're interacting and operating generally.

Brilliant, thanks Charlie. Just the gentleman who's just behind him.

We will get across this side, I promise. We just might as well use the microphone over here while we have it.

Shane Carberry, Goodbody. Just two if I can.

Firstly, procurement has came up quite a lot this morning. Can you talk about the potential opportunity going forward there?

Are we talking, I know you said not a silver bullet maybe, but are we talking kind of low single-digit millions, tens of millions? How should we think about that procurement opportunity?

The second question then was more so around the balance sheet. Obviously done a great job in terms of getting that leverage back in within the targeted range.

How should we think about kind of capital allocation priorities from here?

Do you want to pick up on capital?

I think it's funny, isn't it, how you go from a problem where you swing very quickly into a different question and challenge. Sat here right now, I would give some sort of cautious celebration of the fact we've got ourselves into a much more robust position.

We're still sat with a pretty unfriendly market as we look into the first half and as we look into the second. It has got the capacity, I know I'm sounding very CFO and black-hatted on this, it's got the capacity to get worse before it gets better.

I think look, Gavin's bullet said it mindsetted around the resilience piece, I think first and foremost it gives us that. I think that all elements of this sector, as probably came through in my script, both in terms of kind of the materials manufacturers, distributors, and end users are under very, very significant levels of stress.

I think that's the way I look at it in the first place in the first instance. Do I think we can continue to compound and build on that position and grow that cash position?

Yes. Our first obligation has to be to fix and invest in the core businesses in the parts of the business that we've underinvested and neglected over the previous years, unapologetically.

That's important for our colleagues, it's important for our customers for them to hear that message. When we get beyond that and certainly into better market conditions, that's a quality problem to have, and we'll worry about it at that time.

I guess that's how I would see it at this stage.

I think on quick procurement, Shane, I'm not going to put a number on it because I think it's unfair to try and put a number on it. What I would say is I think we've been behaving more sensibly like a market leader with our large suppliers.

We had various businesses within the group who share common suppliers and they didn't all have the same terms, and that just felt like inappropriate. We have spent some time just making sure the terms are consistent across the various parts of the group.

I think the procurement opportunity through our Far East sourcing office, which is part of Lakhvir's sort of empire within Toolstation, is a real opportunity for us. I think if we look at what other people have been doing there, there is absolutely no doubt we have been under-punching on how we've been doing our procurement for some considerable time.

I think even though we've done a lot of work in 6 months, there's a lot more work to come, and I think it's going to underpin that gross margin expansion as we go forward as well. We absolutely, fundamentally believe gross margin expansion is still critical going forward from where we are now to offset anything that might come in terms of volume degradation in the market.

Right next to Shane.

Morning, everyone. Sam Cullen from Peel Hunt.

I've got two also. Talked a lot about the balance sheet and your relative strength, just interested in your view of the financial stress amongst your competitors and scope for capacity to come out of the industry in the medium term.

Then the second one is you seem to have taken 2 or £3 million out of central costs in the first half of the year. Is there more to come in the second half and in more to come in the medium term?

I'll let Duncan touch on costs. I think in terms of market consolidation, look, it's always difficult because the vast majority of our competitors now are private equity, they're not publicly quoted businesses.

Getting the real quality of information, I think is very difficult. From my perspective, I think our focus is absolutely on how can we do what we've already got and do it better.

We've started a journey with Green & Gold in improving the profitability, improving margins. We've got a plan to grow and develop Toolstation.

We understand that TF Solutions and all the other businesses have got opportunities. I think as and when the opportunities externally arise, fine, we'll have a look.

Our primary focus is doing what we do better, because I think also if any opportunity comes along for consolidation, it's always easier to buy a business and bring a business in when you're absolutely flying as opposed to when you're just on a recovery path. I'm not saying never.

Sod's law the phone will ring tomorrow, but our focus is doing what we do better than how we do it now.

The only thing I'd add and build on that is it may not just be our competitors, but it's up and down both parts of the supply chain as well. Got a phone call on Friday to say a final element of credit insurance had been pulled on a fairly significant national house builder, right?

These are things we have to take into account and be considerate to. The stress is real, and that shouldn't surprise anyone.

On the costs, look, I think when I walked into the group, I think it's fair to say, having been in the group for a long period of time, characterized our attempts to take costs out over the previous 4 or 5 years as being very much a kind of a big bang in the sort of November or December of each year-end, and then cost and headcount would just creep back in and there was this sort of boom and bust, which is not a sustainable way to run the business in the long term, and it also creates a lot of colleague uncertainty. We have taken a lot of cost out from central functions over the last couple of years.

I would characterize us now in a far more calm and sustained place where when we do see people leave the organization or we do see other things happen, we're taking every opportunity to eat into them to say do we need to replace that person or head, do we need to keep that in, which is a much calmer and more considered way of approaching things, and I hope people in the organization are feeling that. The answer is no never say never that we can't do things more efficiently.

Undeniably technology coming in is going to enable that. If I think about in my own area, that all the extra heads we brought in to manage the challenges with Oracle invoicing processing, we're virtually back to the baseline we were before.

In theory, we should be able to do that more efficiently given the fact we've put Oracle. There's always things we can do, but I think the idea we're into a sort of big bang type restructuring in those functions is less likely because I think we've got the ability to be more thoughtful about it at this time.

We'll take one from this side of the room just for a bit of variation, Bailey. We will come back to you, I promise.

Thank you. Priyal Woolf here from Jefferies.

I've just got two questions. The first one was in terms of property profits, etc.

I think Duncan used the term self-consolidation. There's obviously been significant downsizing of the branch network in merchanting over the years, I just wanted to gauge is this something which will just be round the edges incrementally, or something quite significant?

As a part B, is network downsizing something that you're seeing amongst your competitors yet as well? Then the second question is just on pricing discipline.

You've talked a lot about this today. What are you doing differently now that you think you weren't doing previously?

Thank you.

Sounds like they're both for you, Duncan.

Lucky me. Look, I think on the network, I think I wouldn't say we have seen a dramatic reduction.

You sort of led into the second part of the question, Priyal, with versus our competitors. Certainly materially less percentage reduction or decrease versus the competitor set.

My comment was more perhaps driven, and Gavin made the point around difference between delivered and collected product, for example. I sort of think that that may well be more present in some of those business units where there is less criticality of where we've got location per se, number one.

Number two is in where we have seen some of our competitors close branches in what we would consider to be really high-quality, long-term locations of choice in strong market towns or big urban conurbations, no appetite or interest to want to close those. Look, the reality is if volume performance remains at this level for a period of time, you just have to look at the amount of real estate you've got and whether you think you can supply that volume going out.

We would be being irresponsible if we weren't looking at that from a shareholder perspective where we think it can make sense and it's the right thing to do. That's the way we would look at the network.

As I say, that is not into we're going to stand up in March and announce a 30 or 40 branch sale and leaseback program. I just think that makes no sense whatsoever.

It does nothing to improve our leverage. Wherever you can make really decent returns or yields on those, you just get turfed out of those branches with the first lease break, which makes no sense at all.

Sorry, your question on pricing was

What are we doing differently?

What are we doing differently? Look, I think Rich is sat in the room, and you can ask him the question yourself afterwards.

I think we've done a really great job at having a much more effective pass-through of price inflation in the first half than we have historically managed to do. A lot of people ask me the question around, well, why don't you get all of that to stick?

Because we're not a retailer. We don't have a shelf-edge price.

There's a discount and there's a commercial negotiation to have every time someone walks into one of our branches. We've done a much better job of focusing on that and putting the clarity of that messaging out there.

Frankly, as well, within our BUs as well. It just happens to be the most material effect in Green & Gold.

As I said, I think that's on the output. On the input, in terms of what we're doing on suppliers, I described it as good old-fashioned category management.

We have been doing some pretty dysfunctional things over the last few years, and I don't mind saying that. Buying stuff from some of your competitors is not a desperately smart move when you can source it in-house.

We're just professionalizing, I think, the way in which we're doing procurement. You just get it at both ends in the respect of the ability to improve gross margin.

I think there's clearly more still to do.

Take another one from down the front on this side, Bailey, if we can.

Ben Wild from Deutsche Bank. Two questions for me as well, please.

Firstly, there's been a price inflection in H1 that we've discussed. To what extent does the 100 bips of gross margin expansion in H1 benefit from that price expansion, and would you expect there to be a degree of giveback in H2?

Then secondly, on the Toolstation lightside synergy with the General Merchant, to what extent do you worry that integrating the Toolstation lightside offer into the General Merchant will be gross margin-dilutive for the General Merchant over the medium term?

I'll pick up on Toolstation

and

I'll let you pick up on the first point. Yeah.

Honestly, Ben, it doesn't worry me at all. That answers your question.

No, look, I think we absolutely recognize there are things that we do really well in Green & Gold. If you look around our yard areas, we do bricks, blocks, timber, stuff like that really well.

Our shop areas, I think it's fair to say, have been poor. Rather than just constantly looking backwards and going it hasn't been great, it's like what can we do to improve this?

When you look at ranges like electrical accessories, when you look at ranges like plumbing and heating accessories, we've already got really good category plans and supply chain set up through Toolstation, and the product is basically the same that is going into the Green & Gold merchant business. Genuinely it doesn't worry me at all.

I look forward at this and see this as a really positive opportunity. Rich, we'd stake Rich's career on the fact that the margins and the sales and the profitability of the shop areas can improve going forward, because that is a critical part of where we see the gross margin expansion.

Sorry, Rich, for banking your career on that one.

On your price question, look, I'm not going to break out the component parts of how it's contributed to gross margin across all the areas, aside from the fact I think it's commercially sensitive. To your second part of your question around how much do I think we need to give back?

Look, I'm optimistic, and I'm optimistic because the reality is, as we've I think over the last couple of reporting periods laid bare in terms of the profit bridge in the group is, everyone is facing the same cost headwinds in this industry. Actually, many of our competitors have got to face into refinancing costs at a time when interest rates look set to rise going forward.

There's no secret sauce here to making a turn or making money that we somehow are not accessing, that, if anything, we've all got the same challenge. You cannot keep discounting unnecessarily on price in a bid to take share when you're making no money and your net debt position is just getting bigger and bigger.

That isn't a sustainable position. Do I think we've reached a tipping point with price rationality?

I hope so, because the reality is that's going to come home to roost, and it's coming home to roost right now. The question is what does that do to demand, though, in terms of does demand become stanched because ultimately things just becoming more expensive?

I don't think that necessarily means that pricing has to come off, it just might mean that it continues to weigh a little on demand in the second half, and I think that's probably the case at the moment. Our sense is I think in terms of RMI activity, for example, we've got a lot of repairs and maintenance activity being done at the moment, but discretionary improvement activity is probably pretty low and pretty subdued.

That's a much broader economic question around feel-good factor and confidence and household savings, etc., which we won't go into now, but I'm relatively optimistic we can hold that pricing benefit.

Cool. Just take that one on the outside there, Bailey, then we'll switch back over onto this side.

Morning. Adrian Kearsey, Panmure Liberum.

Two from me. The gross margin up 100 bips at the group level, Green & Gold, where's the gross margin change?

Was it sort of in line with that, above, or below? Then the other question, given some guidance on Toolstation UK in terms of additional sites, in terms of geography, in terms of the format that you planned for those additional sites, are they going to deliver similar kind of revenue per branch and EBIT per branch than the existing, or is there anything in there that we should be thinking of in terms of it's sitting in different places so therefore they'll have a different financial dynamic?

No, it's a good question. Toolstation, it's a properly nationwide brand now.

We've got very, very close to 600 locations now across the whole of the UK. There's a two-pronged attack to this, one of which is we absolutely recognize we need to get the branch numbers up from 590 to 650.

If you look at our current average sales per branch, that will bring a level of revenue over the next 3, 4, 5 years anyway. Also part of our plan with Toolstation is to improve and increase the densification of the sales through the mature branches.

If you look at our competitors, we believe that they do a better job than we've done historically in terms of getting a level of turnover per branch. I don't think you should try and model anything in that's different in terms of the next 30 the next 60 branches compared to what we've done in previous years.

We have got opportunities for some formats in London, but we've also got places around the UK that we believe we need to get more locations, and we've got locations around the UK that deliver a level of return now. I don't think you should be building anything different in terms of the modeling for what the Toolstation branches should be going forward.

On your gross margin question, Adrian, look, I'm not going to break out the individual BU contributions, but given the materiality to the group of the General Merchant, you can make a reasonable inference around that.

Take one just down this side, please, Sarah.

Thanks. Will Jones from Rothschild & Co Redburn.

Three if I could, please. The first, within your full year or second half comments in the release, is there a base case there that the merchanting like-for-like moves back to small positive, or is it more or less the flat again of Q2 in thinking?

Second, just coming back to procurement, I think you mentioned you'd cut out 20% of your tail suppliers. Just wondered if you had a sense for what that 20% would be in value terms.

When you go back to those main suppliers and say there's a bit more business for you potentially at a keener price, what have been the early responses as a general remark? Then the last one was just around depreciation.

I think it fell about £10 million year-over-year in H1. Presumably that's a function of the write-downs at the end of last year, but does that play through for minus 20 for the full year?

I wouldn't get drawn into giving you a comment on the merchanting like-for-like. I think we're content with where we are in the outlook statement for that there may well be some ups and downs across the group as to where we sit.

Is it possible? Yes, it's possible, but I wouldn't crystallize that as a piece of guidance.

I think on the tail suppliers, look, I'm not going to give you the value per se, again it's commercially sensitive, other than to say it's a very significant number of a group of our size, as you would expect. What has been the reaction from our larger strategic suppliers?

Pretty positive, as you can expect. Right in a market where volume is tough to come by, they're welcoming and valuing that interaction.

It is not to say that we do not want to have a relationship or a procurement mix that has a full gamut and array of suppliers going forward, that's not the point. Where we are buying things that, as I said, where just we're not getting any purchasing scale or we've not got any kind of quality framework agreement in place, that needs proper focus and needs proper attention.

I think, as I say, I would just describe it as a good professionalizing of that. Your last one, yeah, you've answered your own question in terms of there is obviously an impact associated with the impairments we took in prior year, and reasonable to assume there's a linear impact on that as well.

Thanks, Will. Do we have any more?

Down the front here, please, Bailey, second row.

Hi, thank you. It's Zach from Morgan Stanley.

Two questions, please. Firstly on working capital, where do you think you've made the most progress in the first half and what are the goals for the second half?

Then maybe just in the first half working capital performance, how much was driven by actions taken last year that have carried over versus new actions this year? Then the second one just on the dividend.

It was down year-over-year while EPS is up and you're back in the targeted leverage range, in that context, how do we think about the dividend for the full year kind of assuming stable market conditions? Thank you.

I think on the working capital, look I'm not going to break out where it's come from. It is multifaceted.

It's not actually as big a contribution as it's been in the previous half at the end of last year, and as we talked about in terms of this £17 million net property receipts which plays into that cash number as well. There are parts of the working capital endeavor which we're going to start hitting diminishing returns because we've done a lot, we need further cash enhancement to come from operational cash flow coming from the group re-expanding as we move into better trading conditions.

In your second part of your question was how much of it carries over into this year, look, yeah, of course there's inevitably an annualization effect of things that we've done at the back end of last year, albeit I would say we have undertaken quite a bit of activity in the first half of this. Look, yeah, the EPS is higher because of the property profits and because of the higher interest income we've taken through the course of the year.

I wouldn't read too much more into the fact we have a third policy we've historically applied in applying our overall 30 to 40% payout ratio of a third in the interims, which is in line with that at the moment, and we'll obviously correct that at the full year, I wouldn't read too much into it one way or another.

Just down row three, please, Bailey.

Thank you. Hi, Alison from Bank of America.

Just two questions from my side. First, the potential for further gain the working capital in second half, should we be expecting the net cash excluding leases could continue to grow?

This first one. Second one, I know we don't want to get into too much details in the Toolstation Benelux disposal, but I wonder do we have any a target for the timing?

Should we be expecting ASAP, or maybe just second half, or maybe even next year? Thank you.

On Benelux, these discussions are taking place, they're well-advanced discussions. These things take the time that they take, but it's a very active process.

I can't really sit here and say whether it'll be 2 weeks, 4 weeks, 6 weeks, whatever, but this is a very active project that we're currently working on.

Your question on working capital, look, yes, there's a target to improve it further in the second half. I'm not going to put a number on it.

We've done a pretty good job, I think, in the last two or three reporting periods of saying, trust us and leave us to it, and we'll deliver some further improvements. I don't know how big that improvement is.

I've still got quite a sizable dartboard with opportunities on it, and we'll just have to work our way through and see where we get to.

Any more? Brilliant, I think we are done.

Ladies and gentlemen, thank you for coming in this morning. Appreciate it.

I know it's the holiday season, but the building is very nicely air-conditioned, it's very pleasant being here today. Hopefully you enjoy the rest of your summer, and we look forward to seeing you when we do the full year results in March next year.

Thank you very much.