Good morning, ladies and gentlemen. As Chairman of Travis Perkins, it's my pleasure to welcome you here to our 2019 full year results presentation, which Nick and Alan will take you through very shortly. I just want to cover two topics first before I hand over to Nick. Firstly, I just want to touch on safety performance within the whole area of HSE. Nick will talk a little bit more in detail about the underlying, but I'm absolutely delighted, as is the board, that our underlying KPIs on safety performance are heading materially in the right direction as in 2019 versus the year before. I think if you look at the industry statistics and the way these are compiled, it does show that Travis Perkins is the leader in the field, in this particular field, in our sector.
You know what's really, really pleasing is when you go around the patch, you don't pick up one ounce of complacency in this area. That's really, really key because we have a goal, which I hope you're all familiar with, but if not, you should know, which is zero harm. We need, and we require, to be in a position where all of our employees, our contractors, our customers who work at or visit our operations or our offices day in, day out, go home to their families safe and unharmed. We're not there yet. There's an awful lot to do to get to that point, but we're on the right path and we're certainly committed to it. The second thing I wanted to touch on was board changes, which I usually do, at the opening of these presentations. I last spoke to you in July.
Those of you who were here at that time, Nick Roberts had joined the board, but had not taken over from John Carter, who presented the results at the half year last year. That's the first change. We also have two imminent departures in our non-executive ranks, which I'll come to in a minute. To fill that gap in advance, we brought on two new non-executive directors at the end of last year in the shape of Blair Illingworth and Marianne Culver, both bringing complementary skills and experience to our board to get the right composition for us. The departures which they're there for, to fill in, are Ruth Anderson. Ruth is in her ninth year and has been a really good non-exec director and particularly has chaired our audit committee so well for us over more than six years.
I think it is seven years or so. Hence the timing. It's her last day today. We wish Ruth all the very best, and that's because she wanted, quite rightly as we did, for her to finish off the full year results and to see them audited and presented today. Therefore, she leaves today. Secondly, we've got Chris Rogers, who is our Senior Independent Director, and he actually doesn't go for re-election at the AGM, so he steps down at the Travis Perkins plc AGM in order to then, assuming, the Wickes demerger continues to plan as it's currently doing, then, he will take over as the new Chairman of the demerged Wickes plc at that time. So much for board changes, and I think that's enough for me. Let me hand over to Nick Roberts, our Chief Executive, to kick us off.
Super. Thank you, Stuart, a very warm welcome and good morning to you all. I'm delighted to be presenting my first full year set of results, just eight months into my time with the group. I want to begin our session today by setting a context before Alan presents the financial results, because 2019 was a significant year of progress for the group. What we're reporting today represents progress against the 2018 capital markets day plan to simplify and focus our business. With a plan, as Stuart mentioned, to demerge Wickes well advanced, obviously the sale of the Plumbing & Heating wholesale business in January totally aligned with that plan, we're making good progress. The journey, as you've seen this morning, is underpinned by a positive trading performance as well, with 3.2% growth in revenue.
That's 3.8% like-for-like growth, shade under GBP 7 billion of revenue, with our merchant businesses outperforming. The growth in Toolstation marches on, as we've said, we've got an improvement in performance in Wickes and our P&H business. I think that shows the real resilience and quality of this business and of our people, I'll return to those themes after Alan's presented the results. Over to you, Alan.
Thank you, Nick. Good morning, everyone. Before I take you through the results, I thought it was worth reminding you of the market backdrop during 2019. While the long-term fundamentals of our markets remain sound, 2019 saw market conditions become increasingly difficult, principally due to ongoing political uncertainty. As you can see on the graph, this had a negative impact on our 2 lead indicators of secondary housing market transactions and consumer confidence, and that throughout the course of the year. While the outcome of the election in December provides more certainty, it's likely to take a while for this to feed through to RMI spending.
Given the continuing challenging market backdrop, it is therefore imperative that we focus on executing our strategy to position our businesses to outperform regardless of the market conditions. Before I get into the numbers, I also wanted to remind you of the changes to how we're presenting our results in 2019. Firstly, as we set out with our full year 2018 results, we have redefined our reporting segments. Secondly, we acquired a further 50% of Toolstation Europe in September 2019. This took our holding to 97%. The business is now fully consolidated, for Q4, having previously accounted for the business as an associate. We've also applied IFRS 16 leases for the first time in 2019. While we've not fully restated 2018 results on an IFRS 16 basis due to the complexity of that exercise, we have provided illustrative comparatives as if IFRS 16 had applied throughout 2018.
Finally, we've redefined how we measure free cash flow so as to better reflect the operating cash generation of the business. As a reminder, we've therefore included all base capital expenditure, both maintenance and investment, and have excluded freehold transactions as we view these as financing decisions and recycling of capital over time. As Nick mentioned in his introductory comments, the group traded well in 2019 with our businesses outperforming their peers. Revenue growth was good at 3.8% on a like-for-like basis, with total revenue of almost GBP 7 billion, up 3.2% overall. Adjusted operating profit was GBP 442 million, up by GBP 32 million or 7.8% versus the 2018 comparatives. Excluding property profits, the adjusted operating profit was up 7.1%. At an adjusted earnings per share level, GBP 1.127 is 6.3% higher, with a higher financing charge due to marking to market outstanding forward FX contracts at the year-end.
The improved profitability of the group drove an improvement in return on capital employed of 50 basis points to 10.1%. Given the cash generative nature of the business and our confidence in the long-term prospects for the group, the board is recommending an increase in the dividend of one and a half penny to 48 and a half pence per share, a distribution in total of approximately GBP 120 million for the year. Like-for-like sales growth in the year was volume-led, with 2.3% volume growth and a pricing contribution of around 1.5% as our merchanting businesses acted to recover input cost inflation. Sales growth was stronger in the first half at 5.3% against a weak H1 2018 comparator. Revenue growth progressively weakened through the second half of the year as a result of the heightened macro uncertainty and also a stronger comparator from 2018.
You can see this clearly reflected in the two-year like-for-likes at the bottom of the table. On slide 11, I've set out the drivers of our EBITA performance. Gross profit increased by a pleasing GBP 107 million, driven principally by the strong growth in Toolstation and Wickes. Cost inflation on our GBP 1.6 billion cost base was GBP 57 million, driven mainly by increases in staff costs as well as inflation pressure on rent and rates. These inflation pressures were partially mitigated by GBP 34 million of cost reduction initiatives realized in year. We continue to invest in growth across the group with GBP 56 million of investment in 2019, principally in the expansion of Toolstation UK and Europe, as well as investments in customer-facing colleagues in the general merchant, and also growth initiatives in Wickes.
Let me give you a bit more detail on the cost initiatives delivered in 2019. At the capital markets update in December 2018, we set out a GBP 20 million-GBP 30 million of cost savings target by mid-2020. Initiatives totaling over GBP 30 million have now been put in train, with approximately two-thirds of the savings reflected in the 2019 results. As well as removing the divisional structure, these savings include operational cost savings from the closure of the Heavyside range center network and the restructuring and streamlining of support functions. Inflationary pressures remain with a tight labor market, increases for the National Living Wage, and also to auto-enrollment pensions.
We also anticipate that the demerger of Wickes and the creation of standalone functions in plumbing and heating ahead of a future divestment will lead to around GBP 15 million of dis-synergy in overheads, which the group will be taking actions to mitigate over the course of the next two years. It therefore remains a priority to focus on the simplification of processes and to control costs tightly. I'll now take a look at the business units and turning first to the merchanting segment where like-for-like growth was 3.3%, outperforming our market. As Nick will cover later, this was very much driven by actions to give greater decision-making authority to our branch managers and to increase the focus on excellence in customer service.
Operating profit increased by GBP 5 million to GBP 284 million, with a good contribution from the cost savings I described on the previous chart, helping to mitigate inflation and investment in service. Operating margin was stable at 7.7%, despite the stronger volume-led growth in larger customers and an increase in the proportion of direct-to-site deliveries. Our performance in Toolstation UK was again, quite simply, excellent in 2019. Like-for-like growth was 16.3%, with revenue having more than doubled since 2014.
The rate of branch openings in the U.K. accelerated with a net addition of 65 branches to reach 400 overall. Despite the increase in immature space, U.K. operating profit grew by over 20%. The segment operating profit was held back by the consolidation of Toolstation Europe losses in Q4, following the acquisition of a further 50% of the business. We're very encouraged by the prospects of Toolstation Europe, which is following a similar path to the U.K. business' early development, and we will be looking to accelerate the expansion of the business in 2020 and beyond. Therefore, given the startup losses, I'm guiding to around GBP 20 million of loss for 2020. The Plumbing and Heating segment performed well despite the distraction of the disposal process. While overall revenue was down year-over-year, the like-for-like performance in the branch-based business was good, with 3.3% growth.
The transformation program, which was put in train in 2017, continues to bear fruit, and operating profits increased by 9% to GBP 48 million. While the overall disposal process has been paused, we completed the disposal of the wholesale Primaflow F&P business in January 2020 at an attractive price. The retail segment overall delivered strong like-for-like revenue growth of 8.6%. Clearly, this was driven by the strong recovery in Wickes in 2019, where like-for-like revenue grew by 8.7%. This improvement came from both the core business and the kitchen and bathroom showroom do-it-for-me business. Core categories benefited from a stronger trading plan, while we continued to increase the proportion of showroom orders that we sold with installation services, up to 56% in 2019, and with a strong uptake on the new tiling proposition, which was added late in the year.
EBITDA in the retail segment increased by GBP 20 million to GBP 97 million, with margin benefiting from a more stable competitive pricing environment and good operating leverage. The strong recovery and performance has enabled us to progress the demerger of Wickes, to which I'll return later. Free cash flow performance for the year was good, largely driven by higher operating profit and lower capital expenditure. Cash conversion increased to 54%, despite the significant GBP 60 million increase in inventory as a hedge against a no-deal Brexit. We expect to see some unwind of this stockholding position during 2020, albeit you will all recognize that uncertainty remains. Looking at capital expenditure in more detail on slide 18, base CapEx was GBP 22 million lower than in 2018 at GBP 121 million. For perspective, this is a reduction of almost GBP 50 million compared to 2017.
While IT CapEx reduced, primarily due to the halting of the merchant ERP program, growth CapEx increased by GBP 9 million with the acceleration of branch openings in Toolstation UK, the consolidation of CapEx investments made in Toolstation Europe, and investments in the general merchant. Freehold activity overall was more muted, with both lower purchases and lower disposal proceeds. Excluding Wickes, we would expect base CapEx in 2020 to be in the range of GBP 100 million-GBP 120 million. Covenant net debt increased modestly to GBP 344 million from GBP 300 million at 31st of December 2018. The cash cost of adjusting items in the year was GBP 90 million. This was driven by the Plumbing & Heating transformation and the separation program, and also costs relating to the separation of Wickes.
M&A expenditure increased to GBP 64 million with the acquisition of Toolstation Europe and further payments on both The Underfloor Heating Store and National Shower Spares acquisitions. Taking an underlying view, that's if we were to exclude the higher stock investment and higher M&A costs year on year, we would have seen a reduction in covenant net debt of around GBP 45 million. Returning to the Wickes demerger, the process remains on track, and we are targeting the issuance of the prospectus and shareholder circular later this month, with a general meeting to prove the transaction by the end of April. Given the lease commitments in the Wickes balance sheet, the group will place approximately GBP 130 million in cash in the standalone business to ensure Wickes has an appropriate capital structure and leverage position in line with its retail peers over time.
On the left-hand side of the chart, you can see the impact on the remaining group's balance sheet as if the demerger had taken place at the end of 2019. As you can see, it leaves the remaining group with a strong balance sheet, which is key to underpinning the group's strategy. Finally, Nick will make some comments later on the broader outlook for the group. I thought I'd end with some more technical comments for 2020, as there are quite a few moving parts. The group is going through significant portfolio change with the demerger of Wickes, which will be shown as a discontinued operation in 2020, with the disposal of PFMP, which will be excluded from the 2020 results, and the consolidation of Toolstation Europe's losses of around GBP 20 million.
I've laid out in the appendix the detail of these changes as if they had applied in 2019. The group remains well-positioned, is becoming more focused through portfolio change, and we are optimistic that we can build further on a good 2019 performance in the years to come. With that, I'd now like to hand over to Nick to provide the operational review and strategic update.
Fabulous. Thanks, Alan. As I said at the beginning, it is a great pleasure to be presenting these results to you after eight months with the group. Coming from another part of the construction industry, it's been such a positive experience for me to immerse myself in the business and experience the real pride that this business has in its identity, in its culture, in its brand, in its heritage, and in its purpose and in its values. For me, they really shine through as I've got under the skin of the business. I continue to be struck by the quality and commitment of the people within this business, and the relationships with customers and suppliers that are the very bedrock of this merchant and trade-focused business across all our branches, our shops, our DCs, our offices, both in the U.K. and overseas.
It's clearly a foundation of our success, I have to say, I'm extremely proud to be part of it. As many of you know, because we've discussed it offline, I spent many weeks, as this slide shows, last year in 2019, in all parts of the business, on our roads with our drivers, with our customers, with our suppliers, and with our shareholders, too. I found a company that despite the distractions that are much documented of the breadth of our portfolio, who had never lost sight of who it was and what it stood for in the industry. I saw colleagues where, as Stuart said, the culture and values around safety shone through, but actually, they discharge their duties with well-being and the TP touch to the fore. That really resonates with our customers and our people.
Just to reinforce Stuart's comment, without going into safety statistics in detail, this is a particularly important issue for me, coming from the construction end and professional services end of the construction industry. I see here a business that has reduced its lost time instant frequency rate by 25% and its severity rate by 27% in the year. I have to say, that is outstanding performance in our industry, and we should be proud of it, and we are. I found a business in really good heart and spirit, going above and beyond for customers and its suppliers, proud to be TP, but proud to be taking on the challenges that we were setting it last year, and indeed, that were revealed by the CMD at the back end of 2018. There's no doubt that their confidence had been dented.
There was a sense that we were missing out to competitors in certain parts of our customer segments. Complexity had been put in the way of getting things done for customers, and there was a sense we were losing and our people were frustrated. They were energized, really energized by the sense that the business was now listening to their voice again and really wanted to address their concerns, and so enable them to go and serve customers the way that we do here at TP once again. Let's just remind ourselves of the key messages from the CMD back in December 2018. It forms the basis of the current plan. The complexity of the group needs to be addressed. Of that, there's no doubt. Complexity, as we know, brings higher costs, reduces flexibility. It's harder to achieve our goals at pace.
In the challenging environment that we are in, we need to be a lean and empowered business in order that we can adapt and grow in the future. As Alan said, while the long-term fundamentals of our end markets remain positive, significant near-term uncertainty endures. It's too early to talk about, let alone start to think about, relying on a market bounce just yet. Good progress has been made, though, on the core tenets, the two core tenets of this plan, focus and simplicity. There's still much to do around this plan, which itself, in a sense, is a corporate development plan that actually gets the group in the right shape for the future. I believe it's the right plan. I remain committed to it.
We continue to focus on our core activities, prioritizing our deployment of capital and resources to execute change at pace. In order to achieve this, I think our culture needs sharpening. We need to modernize our thinking, increase the pace of decision-making and execution, and improve the agility of the organization. Whilst we've made some really excellent progress to this point, for example, empowering our regional and branch leadership teams to really trade with our customers at a local level, much heavy lifting remains to do to achieve consistent, sustainable outperformance in the market. My team is adopting an approach around transparency and accountability for the execution of our plans with clear and regular allocation of both human and financial capital against the group's key priorities. We're gaining the hard yards against all those priorities and it's showing up in operational performance.
There's much more to do, but we've made a good start. One of the first things for me to do was to set clear current priorities for the group, and they're on this slide. Firstly, the successful demerger of Wickes. Secondly, regenerating our Travis Perkins General Merchants, accelerating the growth of Toolstation. The fourth priority that you see here is to build the foundation for future success of the group. What do I mean by this? Essentially, it's about thinking carefully about how we configure the resources and capabilities we have to support our customer-facing teams to win. This is going to require focus on our people, their capability, the resources they have, the underpinning technology, the organization with which we apply, and this is a critical focus of my team and something I'll come back to shortly.
Regenerating our largest business, the TP General Merchant, it's at the heart of the group and it's critical to our success in both delighting our existing customers and attracting new customers in the future. I use this word regenerating absolutely deliberately. I did not show up last year and find a business that needed re-energizing or reinvigorating. The passion and commitment was always there in this business. What we needed to do was really focus on the core value drivers and the growth levers to restore this business and drive them at pace. Early positive progress has been made. I absolutely commend Frank Elkins, who's with us today, and Kieran Griffin, and the rest of the TP General Merchant team for the progress and diligence and focus that they've applied over the last 12 months.
Decision-making on ranging, on pricing, on customer service in our branches has been empowered locally. This is about really supporting branch managers in what they do best and supporting them with capital allocation and the right network to affect customer change. As a result, we're making progress in the market. Ten consecutive months of outperformance against our peers. We've been really clear and really targeted about becoming a destination again for our Heavyside products, bricks and timber, those categories that we were famous for in the market, really focused on getting back to those basics and have incredible depth of ranges in our branches, such that it inspires confidence both in our people, but actually in our customers that we really are back on our game.
To put some context around that data, GfK tells us that we had 29 months from mid-2016 of performing in line or behind our peer set. From the changes that we've begun early in 2019 with Kieran and Frank and the team, we've reversed that trend markedly, and now we've had 10 consecutive months of share gains and outperformance for the General Merchant. That's just the start for us. Our focus is going to be on continuing that to give us sustained, consistent performance. I think the first point I'd make on this slide is that the first three columns left to right really are a continuation of actions I've just mentioned actually in 2019. Work on these is far from complete. We remain absolutely diligent to really executing the basics, and we need to make sure that we're excelling at these.
In delivering these basics repeatedly, we'll delight our customers and win more share of their wallet. Let me just draw attention to the final column. We've been focusing over the years in investing in our business, but not actually in the core General Merchant branch network. That's the focus of our estate activity now. Improving the estate is part of what I talk about in terms of regenerating the Travis Perkins General Merchant. We're focused on the network of the future. We've been under indexed in too many areas. We've had too many small sites that perhaps have been suboptimally located and we're starting to address that. If I take a big market like Birmingham, for example, our sites there, our branches are too small and are not necessarily in the right locations for us now, and we under index in that city.
With new investments in train, we aim to have the right presence, the right capacity, the right location to be able to address that in the near future and win business again. It's a work in progress. There's much to do. We're focusing capital in that area very deliberately. Our specialist merchants, I've been deeply impressed by the focus and the clarity of the customer proposition represented by our specialist merchants. Again, I commend Frank and Kieran and Angela and Paul and Dean for really the foundations that they've laid. Many of you will be aware of those over the many years as the contract merchanting division that really has shown up where customer relationship has been absolutely paramount, and the teams really understand the kind of core dynamics of these businesses to reduce our cost to serve further.
They made great progress in the face of a challenging market in the last year. We continue to ensure that we've got the right configuration of our branch assets. As a result, we think we can build capabilities and success that can be replicated across other parts of the group as well. Alan's touched on this, but it's hugely exciting and I'm very proud to be talking about the progress made by our Toolstation business. 23% sales growth, 16% like-for-like sales growth. James Mackenzie and the Toolstation team have been doing a fabulous job. As Alan mentioned, 65 branch openings in the year. That's one branch every six days. To stand up the branch, to get the team operational and the branch operational every six days.
This demonstrates real strength in our belief in this opportunity, and James and the Toolstation team are continuing to drive hard. We've got another 60 branches in the pipeline for 2020. We've also been experimenting with different sizes and different formats for Toolstation, in different catchments, so we can really understand how we can optimize the model. For example, last year we opened a branch in Putney High Street, smaller branch, 2,200 sq ft, right in the High Street without the normal parking that's afforded by the commercial unit kind of park that has traditionally been the Toolstation home. With our web platform, with five-minute click and collect on a main trade route, our customers have really benefited and really enjoy the use of that format where they don't necessarily need to park for long.
It's a main trade route into town, and that five-minute click and collect has enabled us to give them the service proposition to our trade customers, but has enabled us to drive growth with that format. We continue to look at how we optimize those different formats going forward. We really invested last year in broadening our range and expanding our categories in areas that are directly relevant to our trade customers with tremendous effect. Be under no mistake, under no doubt that this is a trade proposition, and we are really building the credibility with our customers in our categories and range that reinforces that. We have a multi-channel offer from the branch to the catalog, to web, to click and collect, and we continue to look at ways in which we optimize that.
The continued expansion of Toolstation very clearly is one of the group's priorities. We're deploying capital to support James and the team, deploying resources to support him and the team, and really cementing our trade focus and credibility, branch, catalog, online and furthering the proposition. This is a really convenient platform for our trade customers. We've also made some great progress in Europe with Darren and Lucy. Lucy was one of the founders of Toolstation here in the U.K. She's now moved to France to help us grow our business there, and we are supporting them with replication of our model, close working with the team in the U.K., really supporting further growth, and we're excited about that in the years to come. Clearly, that business story is at a very different stage to our business in the U.K., but we remain very excited and very focused on it.
The Capital Markets Day in 2018 referred quite appropriately to the careful management of cost. This, as I'm sure you'll agree, will always be a focus for a business like ours, as we address complexity and journey towards greater simplicity. In my view, it is so much more than that. There is much to do to create a firm foundation for further growth by thinking carefully about optimizing our cost structures, our technology, our capability, and our responsibility to society as leaders in this industry. We're carefully considering cost and investment to create that lean and empowered organization, but with having the right capability in the right place within the organization.
We intend to build a modern, agile business underpinned by flexible technology to delight our customers, to enable us to serve them quickly and conveniently, and at the right cost, and the appropriate resources to support this and are making good progress in our future plans. We are also committed to creating really exciting careers and opportunities and futures for our people, and ensuring that we are responsible stewards for our business and the communities we serve, the communities we are located in, and that we actually think about using our industry leadership wisely. We are the market leader, and we are very thoughtful. I am very thoughtful about our role that we play in driving a responsible agenda for the construction industry as a whole.
We need to be in the discussion and leading the discussion on skills, on diversity, on decarbonization, on generating value and greater inclusion in the communities that we serve and support. I believe this platform will serve us really well in creating both the shareholder and the social value that we require in the future. As Alan mentioned, two key planks of the 2018 portfolio plan were Wickes and P&H, and I'm really pleased with the progress that's been made on both fronts. Firstly, I commend David Wood and Julie Wirth, who are here with us, on the progress that's been made in Wickes through 2019. The de-merger remains on track, but it's really tremendous to see the positive recovery and performance that we've seen within that.
Many of you will have seen if you weren't at the CMD in January, and will have good insight to David and Julie's plans in that regard. On P&H, Andrew Harrison and the team have made great progress with the improvement in performance within that business and enabled us to successfully divest the wholesale business at the end of January. As that last slide indicates, at a portfolio level, we've been able to demonstrate much positive progress in my view. I think we've been able to evidence much progress, kind of under the hood, if you like, in making gains in our markets and in our businesses. We've got much more to do. I think there's much more to go as well. I've talked about continuing the journey of focus and simplicity and delivering the plan.
I've talked about regenerating our core merchant and continuing to outperform the market. I've talked about driving further growth in Toolstation. Actually, I've talked about establishing a firm foundation for future growth by delivering a cost structure and a mix of capability, of resources, of technology that will set us well for the future. I've actually talked about a rigorous and focused and prioritized management team, really focusing on the allocation of capital, both human and financial, speeding up decision-making, executing at pace, and delivering value for our shareholders, our people, the communities in which we're based, and the industry that we're proud to be part of. With that, Alan and I are very happy to take your questions.
Thank you. Aynsley.
Thanks. Two questions, please. First of all, just on any kind of comments you're willing to give on trade-in in January, February, maybe how that compared to Q4, if you've seen any kind of improvement there? Second question, just on the merchanting side. Obviously last year you did a good job kind of taking market share again, stable margins. Interested to hear your thoughts about how you think about that balance between volume and margin in 2020? I assume you still want to take market share. Should we expect stable margins or could it even be better?
Good, thank you. Alan, maybe take the second one and I'll pick up the first. I think it's very early to talk about the new year. Broadly, we are seeing a similar trend to what we saw in Q4. Whilst we see the sentiment that comes through in the market, obviously post-election, and post clarity of that, we don't yet see necessarily that showing up in our business. We know very well the lag that occurs between that sentiment playing through and that showing up within our branches. Overall, we've had good momentum into the new year, but it doesn't look markedly dissimilar to Q4, which is why actually we remain resolutely focused on actions and measures within our own business that ensure that we continue to outperform as we've demonstrated last year.
We remain confident with that's being masters of our own destiny, and ensuring that we continue to keep very focused on those measures while we watch the market very, very carefully.
Please press star one to ask a question.
On the merchanting business, Aynsley, I think some of what we achieved in 2019 was despite pressure on gross margin from a customer mix element. What I mean by that is we saw our larger customers growing more quickly during the year. We also saw more of a trend towards direct-to-site deliveries, which don't transit through the yards. I'd expect to see some of that continue in the coming years. Point one is there's a bit of downward pressure on gross margin percentage from that. Clearly, what helps us balance that overall with the two factors, one, growth in volume and therefore operating leverage within the business. The second factor was the cost initiatives that we've put in place. When you get down to an operating margin percentage point of view, that's how we're able to keep the operating margin percentage stable overall.
Be very clear, I don't see an outlook where there'll be significant margin expansion at an operating margin level, but nor do I see any reason why operating margins would go down significantly materially in the coming years, despite that pressure that I see from the bigger customers continuing to grow a little more quickly than the local tradesmen.
Thank you. Gregor Kuglitsch from UBS. I think you referred to the appendix slide, sort of the pro formas. I have to confess, I don't know the exact slide number, but I think the number's around 420 or so, sort of the starting point if I'm not mistaken, including Wickes for trading profit. You did mention dis-synergies, I think kind of GBP 15 million, if I'm not mistaken. I guess those will be incurred by the group, the RemainCo, I suppose, Travis. I guess the overall question is when we take all the considerations into account, trading, dis-synergies, cost-cutting, et cetera, directionally are you expecting to deliver profit growth against, let's say, GBP 420? Last year you had non-trading cash out of GBP 90. Can you just give us a sense how that's trending? Is that going to reduce materially or there's still going to be some material headwind?
On Toolstation Europe, obviously it's kind of a new business for all of us to consider. I guess you have the precedent of the U.K., but as the business plan stands today, at what stage do you think you can get that to break even more or perhaps profit? Thank you.
On the non-trading cash first, Greg, your second question, the GBP 90 out, a lot of that was either prior year provisions transforming into cash, or it was the cost on the Wickes demerger on the one hand, and secondly, the Plumbing & Heating separation and transformation. A lot of that work's done. When you look at the detail of the balance sheet and where the provisions sit, you'll see the provisions for restructuring are significantly down year on year. There will be some cost to complete the demerger, some of which arise in the remaining TP group, some of which arise in Wickes. If you're trying to stick the two together, I'd estimate GBP 10 million or so to complete that during 2020. I think it will be materially lower year on year than the 2019 figure.
Toolstation Europe and a break-even point that we might see, it depends how many countries we open in. If I take the example of the Netherlands, when you look at the contribution from the stores we've opened, like the U.K., they are contribution positive within 18 months of opening, with some variation between them. It's following a similar path to what we saw in the U.K., probably with a higher online participation than we saw in the early years in the U.K., just reflecting, I think, how online trade overall has developed in the last 15 years. We then have an element of central overhead for Toolstation Europe, and clearly in France and Belgium, we're heavily loss-making because we're investing in getting the name out there and in terms of acquiring customers and getting them to understand the proposition and be repeat customers for us.
I'm afraid it's a bit of a fudge of an answer, but it will depend on how many markets we go in and how quickly we want to develop those markets. We'll provide the detail as we go. Then in terms of the chart you referred to in the appendix is Appendix 2 on slide 37. That's the one where we tried to lay out what are the moving parts, and if you took 2019 actuals and then said on an underlying basis for the remaining group what are the numbers? You're right, including Wickes, GBP 423 million. The remaining group, excluding Wickes, GBP 326 million of EBITA on an ongoing basis for 2019.
To be clear on the GBP 15 million of dis-synergy and what we mean there, first of all, those are costs which are incurred in centrally managed functions, not necessarily in the central cost segment that we report, but they are centrally managed services we've been providing to both Wickes and Plumbing and Heating over the years from the group, where each of those businesses has now invested to be a standalone business. Some of that cost will remain in the center. Some of it will be actually in the merchanting and Toolstation segments because if we were providing, say, an IT service and we were allocating that out across the group based on the number of employees, number of users, the number of users shrinks by a third without Wickes and without the Plumbing and Heating division. It's a question of how you allocate out those costs.
The costs don't go away immediately. You have to work your way through the contracts with the providers over some time, which is why we've given the time frame of over the next 24 months. That's all been part of the plan that we had as we were planning the demerger and also the disposal program on Plumbing & Heating. Directionally for 2020, I think we've said we expect to make progress overall. I haven't put a time frame on that. I have to admit, I think it's rather challenging to predict at the moment. Let's see where trade agreements settle and what impact that has on consumer confidence, where the housing market and level of transactions go. I'm not expecting anything to happen rapidly in terms of pickup within the market.
Aynsley referred in a question to t he trading performance in January, February compared to Q4. Without going into more detail, we've not seen any discernible Boris bounce or anything like that from housing transactions or sentiment picking up, and nor would I expect to see that for a while yet.
Thank you.
Charlie?
Thanks very much. It's Charlie Campbell at Liberum. I've got two questions I think are probably related. The first question is about kind of getting the market share gains you've seen in Core Travis to be sustained. I'm just wondering whether you can do that without a kind of meaningful investment and step up in IT spend, particularly given kind of maybe average age of TP customers and if you want to kind of lower that age, whether you'd need some more IT spending. Second question is on the balance sheet and just thinking about kind of the deleveraging that comes not just with Wickes, but also the Plumbing & Heating disposal.
That would put you in quite a strong position, and therefore sort of wondering why you're not using that strength to step up CapEx now to go after some of these opportunities that you've talked about in Core Travis, IT as well as kind of physical estate.
Good. Let me start. Maybe you pick up the second one, Alan. Thank you, Charlie. We remain really focused on those measures that we are taking to improve the business within our branches and with our customers. That, as you see, and as we remain really clear, is having great effect in retaining our customers, delighting them, and making sure they come back and increasing our share of wallet with them, and indeed, attracting new. Our legacy IT systems, and it's been fascinating for me, as you'll appreciate, coming in last summer when we announced what we announced, to actually go and immerse myself in the business and see actually what state our IT systems were in and whether they actually constrained our business.
What was interesting to me was that far from being a constraint to our business, they provide a sound basis upon which we can trade. They are operationally stable. We know exactly what to do with them. Indeed, across our peer groups, they're largely industry standard. What they don't enable us to do is serve customers in the future in the way that we would increasingly like, but it doesn't stop us making those improvements now. We're really focused, actually, whilst we think very carefully about, as I said, what underpins our organization for the future, what technology, what capability does that create? We're well advanced with actually doing things that delight our customers now that actually our core systems don't constrain us for.
Delivery management, increasingly web-enabled sales, and I've mentioned that within Toolstation, which is actually a completely kind of integrated part of our customer office offer for our trade customers. As we see the demographic change, which comes to the point of your question, Charlie, I think that we can continue to serve our kind of core, progressively aging demographic extremely well by the measures we're taking, increasingly serve them online and with better propositions around delivery management. We know we are able to do whatever it takes to appeal to a younger cohort coming through. Clearly, you will see that accelerate as we develop our IT spend. I really want to stress that we are not constrained in what we do, but we know that the kind of underpinning has to be upgraded in due course. We're being very thoughtful and very focused.
It's been a huge amount of my time with my team over the last six months to look at how we do that, and we're well advanced with our plans in that regard. Do you want to pick up the balance sheet point?
Yes. On the balance sheet, Charlie, I think if you look at appendix six in the presentation, slide 41, just to underline the point you're making. We've done a pretty good job at getting the leverage in the business under control. You referenced Plumbing & Heating. I'm not going to worry about the Plumbing & Heating element now. If and when we dispose of the business, that will be the appropriate moment to talk about what we do with the proceeds. If we put that to one side, I think the group has a really good cash generation profile, so it can afford to invest in its businesses, both operating cost investment and capital investment from the cash flow that we generate. There is no sense of holding back in any way to get the balance sheet further strengthened and not invest in the businesses.
Some of the estate investment, which Nick referred to on the chart with quality range service and estate, that would come through the freehold side or investment in site through lease and then developing those lease sites. As you know, we funded a lot of that sort of investment over the last six or seven years from recycling the property portfolio within the group. The net book value is down slightly, but the value in use or expected value of the property portfolio when you value it continues to grow year on year. There's plenty of flexibility there that we can use to invest in the general merchant, and we will continue to do so.
Just standing back from that, I think it's fair to say that, given the four priorities that I laid out in my slide, we have a very full plate of work, and we and the team have had so for nearly 14 or so months now. As we look carefully at the value drivers that we have talked about and the critical growth levers of which estate is one, as we address those priorities, we'll be able to really clarify our intent around our balance sheet and how we use that in due course. At the moment, we're really focused on delivering what we said we would deliver.
Super. Thanks, John.
Hello, Christian York from UBS. Just two from me, really. First of all, could you touch on the cost inflation backdrop as we look through to 2020, and perhaps also on the supply chain exposure to China and anything we should be aware of there and recent developments. Also on Toolstation Europe, clearly that's a key focus going forward in terms of investment. Over the medium to longer term, does that, do you feel, lay the ground for potential other formats in Europe?
Super, thank you. We'll come back to the cost inflation, Alan. Supply chain exposure, I was waiting for a COVID-19 question. Thank you very much. We all debate what handshake we should or shouldn't use as we greet each other. Fist bumps and elbow slaps and everything else. This is a really interesting one. I should start by saying we've been watching this very carefully for weeks, actually, since the beginning of the year. In some regards, our first position was around our operations in China, where we have 30 colleagues in Shanghai. Wellbeing around our colleagues in Shanghai was primary. Clearly, we started to look at our supply base. What impact on supply?
Two things I would say, clearly, as Alan mentioned, and you well know, there was a kind of Brexit stocking that we haven't unwound that has given us some resilience in that regard. Secondly, we budget for the Chinese New Year shutdown anyway, so we're able to manage that within our supply profile, which gives us some resilience. We watched that very closely, stayed very closely in contact with, despite the kind of difficulty with our suppliers, pretty much all of whom now are back and operational. There was a sort of two to three-week hiatus of closure. They're all back, I think, bar one. We are well able to cope, we think. Clearly, it's still some uncertainty around what sits at the ports and then what comes into the port in the U.K. As we all appreciate, this is moving every single day.
We're confident around having managed our supply chain exposure, and we remain, our kind of interest is perhaps pivoting, as we get confidence around the supply chain. It's now, what impact in the U.K.? Obviously, as of last week, or is it now 10 days ago, we have manufacturers and suppliers in northern Italy. Again, we're starting to look at actually how do we ensure supply from there. At the moment, we are confident around that as well. Very focused on it, very focused on core operations in the U.K., but I think we are sufficiently hedged against supply chain impact and intermittency of supplies later in the year. I'll just touch on TSE, if I may, Toolstation Europe, medium long term.
We remain really focused, we are finding, both in the U.K. and particularly in the Netherlands, obviously where we have greater scale, that the convenience of the platform, of the format, the proposition really works well for our core trade customers. This really is a core trade proposition, and the range and category expansion and the way that's being positioned with our trade customers really reinforces that. We remain really focused on accelerating the Toolstation growth as opposed to looking at other formats. As Alan mentioned, actually, the portability of this format and the rate at which we can deploy means that actually that could work in an expanded set of countries in due course. We are really focused on the Netherlands, and we have obviously our trials going on in France too.
I think, medium to longer term within that, actually, we remain really focused on Toolstation because I think that's a really good proposition for our customers, and less so on other formats, which might be more the sort of traditional merchant. We're not going to be distracted by that. Alan, do you want to pick up the cost inflation point?
Yeah. On cost inflation, first of all, in cost of goods or goods for resale, relatively low levels of inflation, I'd say similar to what we've seen over the last 24 months actually would be the outlook for 2020 at this stage. In terms of the overhead inflation areas, I think I referred to some of the pressures. One, a tight labor market, which continues. Notwithstanding virus concerns, I don't see that getting any easier anytime soon. A government committed to continuing to increase the National Living Wage. Whilst we employ above the National Living Wage overall, there are still upward pressures as that ratchets up over time. Thirdly, the annualization of the step-up in auto-enrollment pensions last April, there's some impact early in the year. Certainly thinking for overheads inflation, more of the range of 2.5% overall.
Thank you.
Howard?
Just one from me. Howard Salmon from Numis. Just really on Benchmarx, you alluded at the start to the advantaged companies that you're focusing on. I just wonder how you see Benchmarx macro. Clearly, it is one people will perceive you lose the purchasing benefits with Wickes going. It's not really growing at the moment where obviously you are growing other areas. Just some thoughts on that please, if possible.
Just one quick thing on appendix three, Howard, you've got a chart with the growth and the specialist businesses together.
Yeah.
8% CAGR. I think Benchmarx within that is something like 13% compound annual growth over the period from 2013. Whilst the growth has been more subdued in Benchmarx in the last 18, 24 months, it is a business that's grown pretty well. I think we see that more as an offer to our general builder customers, and the complementarity with the general merchants in the way that we operate it. Nick, I don't know if you.
Yeah. I mean, Howard, I think irrespective of the Wickes position, I think it's an absolutely critical piece of our offer to our general builder and our professional trade, because clearly so much of what they do involves a kitchen at some point. Actually, given the overlap and the ability for us to serve those customers through one format, with Benchmarx in many of our Travis Perkins general merchant branches, it works. Clearly, like many, the kind of consumer sentiment, particularly in the second half of last year and the caution around that, impacted big ticket item purchases like kitchens. It's one that we watch, but it's a core part of our proposition going forward.
Ami Galla from Citi. Just two questions from me. The first one, I'm sorry, on current trading again, but on specialist merchanting, I was wondering if you could give us some color if the order intake trends between Q4 and the early start of the year has seen any material shifts in that business. The second question I had was in Toolstation UK, the sort of growth momentum has been quite strong in 2019. Can you give us some color as to what proportion of that would probably be on the back of your product range extensions and what's really the normalized market share gains in the business?
Do you want to start with the specialist? Yes. On the specialist merchant, Ami, we're very comfortable with where order intake is for the business. Clearly, if you're sat in Keyline at the moment with waterlogged ground, it's quite tricky for some of the principal contractors to get on the ground. We always take the view that it's positive in the longer term, the weather we're seeing for drainage, and happily, Keyline sells a lot of drainage pipe. Overall, I think the outlook on the specialist is quite good. We saw some slowing in major commercial projects more during the summer. I think we know we've got the business coming. We know the contractors have won contracts that we've priced for them. They're just waiting for the confirmation from the developer to get going, but I'm sure that will feed through in time.
On the Toolstation growth element, I think sometimes people try and segment, particularly as you get more towards the retail end, and we contend with this with Wickes as well. They try and segment between what's your online growth, what's your in-store growth, what's your drop ship growth. You can't look at the elements separately. It's the whole, and it's building a total proposition for the customer so that they can get what they want, where they want it, when they want it, whether that's delivered to home, pick up in store, on click and collect, or go in and use the catalog. It is a market share play that we've got here. We have extended the range.
Some of the range extensions that we've done over the last 12 months as the business has matured have gone much more into higher end professional tradesman tools and products, and probably a slightly smaller proportion of own label products that we would have had in the first 10 years or so of the development of the Toolstation. I'd stress that overall package in terms of how the business grows. Yeah, I think that credibility with our trade customer has been at the heart of the range and category extension with brands that we are now at a level where those brands want to be associated with us and they give us, like Festool, for example, and Power Tools, real high-end professional credible ranges for our trade customers, and we've seen great momentum and pickup through that. John?
Hi. Morning. John Messenger from Redburn. Two, if I could. First one was just on the separations and obviously P&H being set to one side and obviously operating independently and Wickes as it goes. Can I just understand. The GBP 15 million that you've identified as dis-synergies, does that encapsulate to kind of the volume rebate, the whole dynamic in terms of what should be a benefit to COGS? Just to understand what is the trade-off in terms of what you're losing on purchasing power through the moves you've made. Just as a follow-up, within P&H, as it's separate, is there now a link between Frank and Arthur in terms of making sure that you have some procurement basis to actually. Because I assume there is a decent amount of plumbing that still goes through the green and gold branches, just to understand if there's a way of capturing that.
The second one was just coming back to kind of the balance between, I guess, delivery management and branches and the evolution over the next few years, Nick. Maybe Birmingham is a good example. Just to understand a little bit more, is it about size of branch, how many there need to be, or whether it's a large satellite on the edge of accommodation and smaller sites within a city like Birmingham that is the blueprint for the future? Is that a kind of capital neutral or is that going to be an increased capital employed that you see specifically around the real estate that the branches will need in that? I think we can all recognize specialists need a much more skeletal kind of branch network.
Actually, does the green and gold need a fundamentally continuing kind of relatively saturated kind of footprint, at least of smaller stores that act as either delivery or pickup points? That'd be great.
Super. Alan, do you want to take the first one? I'll pick up the separation and connection with P&H.
Yeah. On COGS impact on separation, John, we are seeing very little impact on that. The GBP 15 million of dis-synergy is purely an overhead figure. On plumbing and heating, Andrew retired a number of years ago, just to be precise, I think you mean Andrew Harrison. Andrew and Frank are coordinating very closely. We have monthly meetings with our commercial directors that Frank chairs and the plumbing and heating team, and Wickes and incidentally Toolstation are also part of that process.
Excellent. Just to add to that, yeah, absolute connection for the businesses. Indeed, for many of our larger customers, we ensure that they get the appropriate product from either our general merchant or our P&H business. Actually, as far as the customer is concerned, which is the most important thing, then actually that's seamless and the level of connection and commercial as well as a kind of trading and operations level is really close and really key. You raised a really interesting question that we are very thoughtful about and focused on around the kind of configuration of assets for the future.
We know that in some cases and not all cases, some of our branches by dint of history are just sub-optimally sized and located for what I said around us wanting to be absolute destinations around core heavy side categories and indeed the kind of light side format that we want for the future. There's no one-size-fits-all here, John. We're being really careful about saying actually within target conurbations, where do we want the kind of aircraft carrier that's going to be our destination and how will that be served by other assets? They might not necessarily be a TP general merchant. We've obviously got a configuration of Toolstation branches that enable us to really serve our customers in a really convenient way and then for them to access our range in a really convenient way.
I think we're very thoughtful about what the right configuration is, and we'll be making those investment decisions to make sure that we get the market share gain that we want in the places that we want. We really are thinking about it much more as a whole than just a straight kind of branch play within particular areas and saying too many of our branches are too small and therefore they're not fit for purpose anymore. We can also think very carefully, and obviously, I'll look forward to talking to you about this in the future, about how we think about the changing shape of our customer behavior in the future, which plays into your point around the balance between deliver and collect.
I think we've said before that actually, Alan mentioned it today, we are seeing an increased propensity for deliver over collect, our collect business remains really strong. Obviously as our branch colleagues have been re-engaged in that relationship building and service proposition over the last year, we see that remaining really, really important. We're really thoughtful on those points. As I said in my notes, we're really thinking about how we configure those assets and then the underpinning resources and capability to make best from that.
Coming back on the rebates. Has the industry been terrible in the past at just unlocking volume rebates? One would think there must have been a trade-off here in that, particularly in P&H, selling off F&P, you'd expect there to be some impact, or is the supplier base effectively just happy to have a distribution and a spread of downstream route to market distributors? Obviously one of the premises originally for Wickes was, I think, GBP 15 million-GBP 20 million of purchasing benefits. Clearly, we can question whether they ever occurred. I guess the implication here is that there's never really been that benefit captured. Is that the wrong way to think about it?
Yeah
If you step and you think about the whole logic of originally buying this business, you'd expect there would be some trade-off on his departure, and I guess you're kind of signaling, look, that isn't the case.
I signaled that there's no material impact from that and the GBP 15 million was around COGS.
I think we've looked back as part of the planning on the de-merger. We went right back to the Wickes acquisition case. I think undoubtedly you could demonstrate at the time that there were cost synergies, but I believe that the manufacturers earned that back over time. One of the interesting things about the wholesale Plumbing & Heating business is that we were not only sourcing to supply businesses within the group, but also supplying competitors. Therefore, we've always had to manage the PFMP activity pretty separately from the rest of the Plumbing & Heating business, and almost I suppose semi-Chinese walls within some of the commercial teams from a manufacturer or supplier management perspective. That's not really had an impact the other way as we've brought the business out of the group.
Thanks. Will Jones also from Redburn too, if I could please. First, just focusing on CCF, obviously we're aware that one of your competitors struggled there last year. Would you be willing to share the degree of like-for-like growth you saw within CCF against the circa threes for general merchanting, and do you think the opportunity there extends into 2020 in terms of potential share gain? The second was just around the direct-to-site proportion. Do you think that's happening because the largest customers are growing in size, or is it happening outside of the larger customer growth as well? I guess, are you willing to give us a percentage of how much is direct to site, as it were, and how that's changed in the last few years?
Can we just cover CCF and I'll take the other second one.
Yeah.
Yeah. On CCF, we were very pleased with the performance in the year. It exhibited good growth, very strong growth in the first half, a much more subdued performance in the second half, which reflected a lot of the issues around allocation, but also some of the slowdown in commercial activity during the, as I referenced, as we got into August, September, and we saw the commercial side start to slow. I see no reason why CCF wouldn't continue to strengthen its market position during 2020 and beyond. On the second part, I think there's a number of dynamics at play here that we're being very thoughtful around and watching very carefully. I don't think it's just a larger customer phenomenon. I think, certainly within urban areas, take this sort of environment here.
This is about convenience for our customers, about delivering to sites which themselves are very constrained, and where we can optimize our service to ensure that we get in the right vehicle at the right time, according to the work schedule, with the right materials in the right order to go up hoists that are very limited within development sites in centers like this. I think there's a number of factors. It isn't just about large and small or convenience and things. I think it's about the way in which construction is being done, but also the way in which we can optimize our service proposition. Clearly, coming to Charlie's point, as we experiment with tools that enable us to understand those orders and requirements better, then we can fulfill better and delivery, particularly within urban centers, is part of that.
We see it as a real opportunity as opposed to a shift that's against us. We see it as a way in which, again, thinking about how we use our assets and resources, how we build the capability to give that optimized proposition to customers, that we retain that greater share of their wallet. We're really thoughtful about it, looking at it very carefully, and we see it as a real opportunity. Any questions from the phone? We have one. Okay. No?
Hello?
Yes, we do. Hi.
Hi, it's Robert Eason here from Goodbody.
Hi, Robert.
Hi. Just two broad questions. Given that the underlying market got tougher as the year progressed and looks like Q1 is at a similar level to Q4. I was just wondering, how did bad debts evolve through the year and continue to evolve? Is there much difference between the different segments of the business, whether that's by general merchanting versus specials merchanting, whether it's between the large contractor versus kind of the small man in a white van kind of builder? On similar lines, how did working capital dynamics work during the course of the year, i.e., was there a need to push terms out a bit just to keep the volume going? My questions on both fronts are, what did Travis do on all, and what does the general market feel like from a bad debt perspective and working capital perspective?
That's my kind of first round of questioning.
Thank you, Robert. We look forward to the second round.
Yep.
Alan. Go ahead, Robert, with your second-
Okay
series of questions.
Yeah. It's just around. I just found that the last column on page 27 just interesting, and it was just touched on in an earlier question. There might be a perception that the green and gold is a mature brand out there, and you're clearly pointing to significant opportunities with your top 50 conurbations under indexing, so 25% of the estate needing improvements, et cetera. How should we think about the scale of the opportunity that you see because of those two statements, so we can just get an understanding of that opportunity?
Okay. We'll start with you, Alan.
Thanks, Robert. On the first one, Robert, you referenced the trend in Q4 continuing into Q1. If you look at our Q4 like-for-like for the group, it was plus 1.2%. I don't think overall that we've seen anything in the market that's changed, to be honest from that. In terms of the bad debt evolution during the year, bad debt as a percentage of credit sales was similar to 2018 in the year. We actually had a very good performance on our debtor book in the year. I should give compliments here to the finance teams on the collection side, who did a great job for us during the year. I've not detected any particular changes in the market overall, nor in terms of what we've had to do from a debtor book management point of view.
What we have seen is occasionally customers who we've traded with for a number of years who just disappear overnight. We have seen an incidence of subcontractors going under. We've also seen some consolidation of certain players in certain parts of the construction subcontracting industry merging or buying each other to get through tough trading conditions overall. I'm not seeing any particular discernible adverse trends at this stage. On the general merchant estate, it's not something that you can model and say it will be done within two or three years. It will take a number of years to get this right, and I think when you're dealing with a business with an estate of 650 or so branches, it's a continuing process of evolving on that.
I wouldn't want to put a number on the scale of that at this stage, but it's certainly very significant, and we think we have the best business in the market in our general merchant. We've had a really good recovery in the business during 2019. We referenced the share gains. I think the level of confidence that the teams have back with more autonomy at a branch and regional manager level is evident and palpable when you're touring around the business. That all bodes well for the business in the future for me.
Yeah, just to add to that, Robert. You used the phrase mature brand, which I respect. I also made the point that we are looking to modernize our thinking. I think any mature brand has still got an opportunity to really modernize and sharpen the way it addresses the market. I suppose I look at it with a sense of relentless dissatisfaction and say, well, actually, whereas we might have a 15% market share overall, actually, there are some notable conurbations where we might index at around 8% of market share. Clearly, with what Alan said and what we both outlined this morning, with the effectiveness of our team, the effectiveness of our proposition and the way in which we're operating our business, we see a real opportunity to further that market share.
We would never be complacent with thinking that we might have lots of branches, but that doesn't mean that we are optimally configured. To John's point, actually, thinking very carefully about what format and configuration will win for us in the future. Our aim is always to outperform. We're looking very hard at that column and the estate issue to make sure that we're well-placed over, as Alan said, a number of years to do so.
Okay. Thank you.
I think that's it. With that, thank you for all for coming this morning. Really good to see you, and happy now to take questions offline as we finish up. Thank you.