Earnings Call: Q3 2018

Oct 23, 2018

Earnings release

Ladies and gentlemen, welcome to the Travis Perkins Q3 Trading Update. My name is Megan, and I will be coordinating your call today. During the presentation, you have the opportunity to ask a question by pressing star followed by 1 on your telephone keypad. I will now hand over to your host, John Carter's CEO and Alan Williams, CFO, to begin. John, please go ahead. Good morning, everyone, and welcome to the Chebsburg Institute through trading at I think we were shooting production, which I think a lot of the messages are contained within the IMS, and solid Q3 trading performance. Our trade business is collectively performed extremely well with for like sales, plus 7%, taking market share in both in in plumbing and heating contracts and toolstation, as as as highlight is that the half year UK DIY market is still at significant challenges. And that is impacting Wix. And we would always say that there would be short term disruption from the banning of excess from the Hyundai's business. But we're making good progress with our cost reduction initiatives. And taking these all these points together, you know, we remain in line and comfortable with market consensus for the year end. And so we'll open that up for Q and A if we could, please. Ladies and gentlemen, if you would like to ask a question from Gregor Kuglitsch from UBS. Gregor, please go ahead. Hi. Expected. Hi, Gregor. Hi, Gregor. Hi, how are you? I have a question on the consumer business and Wix in particular. So obviously in the statement, you point to sort of a sequential stabilization in the pricing pressure and then also you're talking about better kitchen and bathroom order activity. I just wanted to understand kind of what we're talking about here in terms of quantum, if you can kind of give us some kind of directionality. Obviously, in the first half, you'll grow small in the consumer segment. Appreciate that's not just Wix was down 270 basis points. So I want to understand when you talk about sequential stabilization? Is that a recovery or is it the rate of decline kind of moderating? I just wanted to get perhaps a little bit of color. Okay. So so given this, just as a bit of a phrasing update, we can't get details, but but but those are all, you know, we've we've we've highlight DIY UK DIY remains really challenging, Gregor. I think the team are doing a really good job in in difficult circumstances as a number of moving parts. I think the pricing pressure that we saw in the first half, it still remains still difficult but it is, as we say, moderating slightly as we move through the year through the second half. And we aren't taking advantage of the kingfisher exit of delivered installed kitchens but I'd really call that as it's a delayed because a lot of the orders taken in Q3 and leading into definitely into Q4. Won't be affecting the order sales in 2018, but sets us up at for 2019. Yeah, it is, it is more stable. But we always call that we would see short terms for and I think we're still in that period of disruption as well. Alan, if you wanted to work for that. Yes. No, just to clarify, Gregor, on the the revenue recognition point that John points to on the Kitchen And Bathroom Order Activity. So in the statement, we've said early signs of recovery, we probably saw that in order to sales from mid August onwards. But typically there's something like an 8 week or so lead time on average between when a kitchen is ordered and when it's delivered to the and installed for the customer. So from a revenue recognition point of view, you won't see some of that till the Q4 and as John says, enter 2019. Thank you. And then just one point clarification on your guidance. Are you still leaving the property profit guidance of $25,000,000 unchanged just so we understand what the underlying is? Yes, absolutely. We have a follow-up question from Emily Bedu of JP Morgan. Emily, please go ahead. We have another question from Andy Murphy of Merrill Lynch. Please go ahead. Sorry. I clicked aim guard city. Please go ahead. Hello? Hi, Amy. Hi, Amy. Hi. Just one question on if I could if I'd get to the comment a bit around 2019 expectations here, and I know it's early days. But given your comment around the Kitchen in Bathroom order intake, Should we expect that 2018 is actually a trough year in terms of earnings for the consumer division at least? And any further color that you can give us in terms general merchanting business? And to what extent the cost reductions that you've implemented, should actually see earnings improve into 2019 for general merchanting? So Amy, on the, I'm not going to comment specifically on 2019 expectations overall as you'd at this stage given we're on a trading update call. I think if there's anything specific we wanted to flag, we would have done. So to take from that, at the moment, nothing to say versus what the market's expecting. In terms of the specific on Wix cost savings, and we enacted some of those, at the end of 2017. But as you'll recall, they think like the reduction in head office costs within Wix were only enacted around mid May. And therefore, there will be a, a further benefit from cost reductions, not only in Wix, but across the group from the cost actions that we've taken as we start to annualize those during 2019. So you will get a full year effect from the cost savings in 2019, which will get some boost. As to whether it's a trough year, we'd like to think so far. I think it it would be premature to make too many predictions given the uncertain economic outlook at the moment. I think it'd be best to update in February. And can I have another question, this one on Capital Markets Day in December and what should we be expecting into that update are you looking at a restructuring of the existing divisions? Is some of the smaller divisions and options. I mean, are you looking to exiting some of the divisions here? Could I refer you back to the, the paragraphs that we included in the interim results announcement at the end of July with regards to the Capital Markets Day. If we have anything that was material that we needed to set at this stage, it would have been contained in the statement. So we will provide more detail, as we set out on our operational and business update on 4th December. So that date is now confirmed. Apologies. Amy Biddell of JP Morgan was our next questioner. Emily, your line is now open. Please go ahead. Morning, guys. Can you hear me? Hi, Emma. Yeah. No. We can now, Emily. Brilliant. Thanks. I've got two questions, please. The first one, just on general merch, think on what the price of volumes split is roughly in there. And, and then secondly, just from a contract outlook, obviously, it's a really good performance. Particularly in the light of the price rolling off, what do the order books look like and do you think that continues? Thank you. If I take on the contracts, it does feel a bit groundhog day. We've consistently done well saw three businesses for the last few years. And, like most construction, there is an element of cyclic already about it. We're not seeing anything noticeable in our order book that would indicate a slowing down, but the I think we have to go forward with the degree of cautiousness. We have really worked with the outperformed all three sets as over the last 3 to 4 years. So, yeah, Emily, it's a great performance, but Frank Elkins and the team and we're trading well at the moment, but each period you think yeah, could things slow down, but we're not seeing that through the order book. Emily, on the on the general merchanting, side. Q3 was really a continuation of the trend we saw in Q2 from a selling price inflation. That we've achieved, so, just under 3% sort of level. So that implies that the whilst volume was still negative in Q3 was slightly less negative. I'd also point to the the bit that we highlight in the statement around where we're cycling against a relatively strong Q3 2017 in general merchanting. So if you look at the 2 year stacks, on a like for like basis, general merchanting up 3.7% compared to up 3.3 in Q2. So we think things are improving a little. If you look by quarter quarter by quarter. Clearly, we had a very weak Q1, as you know, we then had a very strong Q2, driven by the improvements in weather, particularly in May June, and then Q3 came back a little from the the May June position that we were, you know, overall, we were satisfied. It was in line with what we were anticipating. Brilliant. Thanks very much. We have another question from Andy Murphy of Merrill Lynch. Andy, your line is now open. Please go ahead. You can transfer the scale again. This this time. Yeah. It it talks about, pricing of being at 1.9. I just wanted to sort of try and explore that a little bit because it seemed to be suggesting that sales pressure at ease. So you're saying you're saying selling prices from you to your customers is coming down. I guess that's on the back of, cost. So cost of goods coming in also coming down. To what extent is that a choice that you're making? And to what extent do you think you could perhaps hang on to the higher prices? And could you perhaps give us a flavor between the sort of the merchanting divisions and the consumer, how that sort of splits in terms of the mix? Andy, on the, I think we pointed in the statement to in the contract merchanting division in particular. And the selling price inflation had come down considerably. Obviously, within there, you have a high element driven by commodity price inflation. And a lot of that we have to adjust in line with where, broadly where the market's going on the on the commodity driven elements. So that's one of the key features within merchanting in the, in the quarter, as I said, general merchant team followed a similar trend to, what we've seen in the first half. From a consumer point of view, you know, that the market environment remains extremely challenging. So from a pricing point of view, we're we're still having to react to what, our competitors are doing I think that's the right trading stance to have taken, in the market, but we are constantly adjusting the the position. We have another question Robert Eason of Goodbody. Robert, your line is open. Please go ahead. Right. Two questions. And apologies for the first one is more of a reminder. And on my part, when you put, in terms of the cost, that you're taking out. Can you just remind us, you know, the quantum that will hit the P and L this year and then the annualization effect into 2019, just kind of refresh our memories on that. And second one, and it's more of an industry wide question. Over the last few weeks, we've had, 2 big independence and getting together. And, you know, Hughes and Gray, on regions. Just wanted your own views on, you know, how does that impact the market? So, you know, from a, a competition perspective. Is this another way the consolidation that we should expect in an emergency sector after the one coming through the 1990s? And so just like your, you know, your initial thoughts on that. I'm sorry. It's just a third question. I know that's pretty small, but I just want to know the kind of the size of I believe you saw that, you know, Birch was, you know, your tool and scrubs business. What was the quantum of the cash flow from that at all? Under the exceptional associated with it. Okay. Do you want me to go Robert, as I've said to you, for many years, the best operators in each catchment across the country is the single independence, followed by some of the regional independence. In both used to our origins, you've got 2 very different businesses for 2 very, well run businesses, and, the week always from a distance have not. I think we are looking at a period of potential consolidation. I'll throw in obviously the change of the equity change at MKM. With the claim taking their position and, and Park has been sold into private equity. So I think we can see over the next sort of 18 to 24 months, a little bit more of this. From our point of view, I would see is an opportunity rather than a threat in the sense that the buying groups have been, pretty supportive on the on the cost price. And, they now have the added complexity of them to run a little bit more of a business. With across brands and slightly different cultures. So only time will tell, but I think we've been waiting for next wave of consolidation for some time. Robert Tomby, on the virtual price tools, first of all, I should point out the business isn't really material to the group overall. The profit position was around breakeven and the disposal proceeds will be something like 9,000,000. On those cost elements that you referred to, there will be a, an annualization impact as we go into 2019, as I said earlier. So it's the position differs from business to business. So I think we do need to go into some of the divisional details to understand that. So If I start with Plumbing and Heating, we had closed a significant number of branches starting last September So we're starting to cycle against some of the first closures which took place, September onwards. From memory, 40 odd branches out of 60 or so that we've closed, we're in the last quarter of 2017. So there's less of a pickup in fronting and heating overheads. Benefits wise as we go into 2019. From a general merchanting point of view, we highlighted GBP 10,000,000 plus cost savings, which were in the second half, of twenty eighteen. So you'll see an annualization impact on that. The contracts division, broadly, overhead position in 2018 will be unchanged versus 2017. In other words, the team of absorb the cost of delivering more volume in a business where we deliver something like 90% at the overall volumes plus all of the inflation. So a great performance by Frank and the team And then from a consumer point of view, we have invested in Toolstation in expansion, but in Wix, we are going to be lower year on year. And I would expect an annualization impact of that in 2019 of at least $5,000,000 coming in the first half. We have another question from Charlie Campbell of Liberum Capital. Charlie, your line is now open. Please go ahead. Yeah. Good morning, Robert. I'm getting a couple of, small things, I think. I think we've largely covered them, but just just just, for completeness. In terms of the space in Q3, plus 2.4 in Consumer, I'm assuming that's all Toolstation, but just wondered what the the change in space was at Wix, if there's anything to say there. I think we talked a lot about consumer pricing and the stabilization, and I think it's been alluded to, but just again for completeness, should we think about stabilization being as a result of sort of changes at home base kind of finishing and maybe some inventory clearance finishing and that may be what's driving that. And the third question is on Plumbing and Heating. Just wondered if there's anything you could say about success of online particularly and whether that's the material impact on the sales growth number? So if we take the stabilizing, issue at works. It's slightly a bit more complicated, Charlie. So as we would expect, we're seeing things moderate rather than change. I think, you know, my my expectations is the bunnies, both the story of the home base, story will run for some time. You know, has already announced 42 store closures, you know, and and and my expectation is that there will see a few more as we move forward. The KMB is is is is gonna be interesting, but we won't see that really play out and took 2019. So I think management in Wix have taken good corrective action but it's still quite a challenged, area of the the market. As you can see from, obviously, the negative sales line but we we're aiming to move it forward, in in in what is a challenging and uncertain environment. On the P and H online, Tony and the team have done a good job. They've got a couple of specialist businesses that continue to grow quite fast online and the underfloor heating business. And a number of the sort of spares businesses that's really positive making good progress, but it's still small numbers on City Plumbing. We've stood up the website and we're growing nicely from small numbers. So I think it will become an increasingly important part of coming in 'eighteen, but it's still relatively small at this stage, but growing. Charlie, on the on the branch numbers, in the quarter. So the growth that we'd have seen in consumer all came from Toolstation, we own 9 further branches in the period. So as we said in the statement, we're on track for 40 in the full year. And we're also well advanced on accelerating that as we go into 2019, with the majority of the sites now identified and other negotiation or being planned. In the quarter, we actually closed 2 Wix stores where the leases had terminated, and we didn't see enough forward volume in those catchments to want to renew the leases. Sure. Yeah. Okay. That's very helpful. Thank you. Thanks, Charlie. We have another question from John Messenger of Redburn Partners. John, your line is now open. Please go ahead. Morning, Capps. Can you hear me okay? You can, Joe. Good morning. Good morning. Just, well, actually, 3. Partial follow on. First one is just on regions. Was it a business that actually was it in any way put out there and that you were able to look at it or were invited to look at it just to understand if it was one that that actually might have made sense of results in the back through history, you know, that that part outside of London heading up into Cambridge, etcetera, is not that intensively covered by yourselves. So you say we rest I don't know what you're gonna do that way. Okay. Yep. I don't know. Yeah. The second one was just on on the cost kind of actions that you've delivered or seen coming through in the third quarter. When we look at how the top line has been evolving, particularly the slightly softer sales in the 2 higher contribution margin businesses in general, merchandising and Wix. Has that meant that you've actually increased some of the operating cost actions that you're taking? Or is it very much what you were doing that you talked about at the half year's stage is just effectively continued? And the final question was on with with Brexit and everything else going on, are there any implications in terms of what you internally are planning on either stockholding, just with a view to what you're going to do at the towards the year end, thinking about what you may have to put in place maybe too early, maybe you'd initially enter into the new year, but are there actions that we should expect around inventory build up or anything that you can have to do preemptively? Thanks. So I'm going to do that. Thanks, John. Regions, yeah, we've been a long admirer of the business. And, you know, they've they've, you know, we we did talk to them and made it fairly easy for us to to move on in terms of what they're termed, for any potential deal where it would have been difficult, if you actually overlay our network with bears, there was a considerable duplication. And in that part of the world, I think it would have actually raised a conflict with c and a. So, so, so it wasn't for us. It was a little bit the same if I'm being honest with you, Greg, as well. We we have a a big presence, obviously, as a network, and these regional players are difficult for us to do without getting ourselves into sort of conflict. So it was one that we welcome. I welcome it. I think it's an interesting group now. With a timber bias that regimes and obviously a heavy side bias, in used gray, both very well, but run businesses. We'll have to see how it moves forward. On Brexit, it is very difficult when we actually don't know what we're actually facing into. But I think the one thing that we are focused on is making sure that we've got products available for our customers. So the most the effort at the moment that we're really putting into place is to ensure that we've got lines of our supply chain lines as open as possible, and we've got stuff on the ground. So, you know, challenge in Alan at the moment. You won't see any impact of that in the overall net working capital at year end. So where where we are looking at some potential, inventory buys as part of contingency planning we'd expect to be paying for those in 2019. So you may see in the components of working capital inventory a little higher would be offset within trade credits, if that were the case. Just on the on the cost actions, I don't think we've changed our stance from what we'd set out in the interim at all. So we challenged all the businesses, to be tight on their overhead and they've all responded really well, as have the central functional budget holders as well where we've asked them to to, be really tight in cost control. And can I just come out with one follow-up just when we sit and look at the numbers here and compare general merchanting here, particularly something like contracts, John, the when you think about contracts growing, I guess, what, just over 5 on volume, by implication general merchanting kind of declining by tinnitus? When you look at that kind of 7% gap, do you can you comfortably sit there until they actually look at this is all about that different kind of customer the different segments that are there in key line CCS and BFS versus our typical RMNI trade on the other side. Or is there a bigger question here about just, again, around where you are sitting on the price spectrum back in general merchanting because that's yeah. So I think it's, yeah, I think it's a bit of both, John. You know, we we we have openly said that trade in Spanish just to hold our gross margin, not easy in this environment. And therefore, it does in some ways restrict, their their their their ability to to grow their top line faster than than they are. The other combination is that they are, that is a challenge market with a small builder. With a different level of disruptors and you flip that over and look at what Frank and the team has done. I think they've they've excelled against SRG and CCS. I think losing their challenges are helping Frank and and VFS, which is a great business, but being helped. And and we look at Keyline, and I think you get back to the roots where we're we're we're So it's gone from my head now, the the the the burdens, I've been amazed and within sort of remnants of it up by Woolsey, as as as as really given key line, CCS and DSS a really wet sale as well. Those markets are operating in non growing Abaxis, they are taking share and taking share effectively. So it's a it's a it's a I mean, you know, both Frank and Paul have got different challenges, but we are enjoying a period where we we can take share and grow contracts businesses. It's tougher in general merchanting. Here's another question from A. N. Zlana with Canaccord Geni Manatee. Your line is now open. Please go ahead. Hi. Thanks. Good morning. Hi, Ashley. Morning. Just two for me, actually. I think you you've kind of touched on it a bit on the working front. But just wondered if there's any material changes we should expect from a cash flow for the full year, whether it's CapEx or, you know, trade debtors. I think consensus net debt's about 330,000,000. So any comments there? And secondly, some of the recent macro data in the hospitals we've been talking about kind of housing mark, you know, the wider housing market not seeing the bounce back post to summer, particularly London, Southeast, and higher price points. Are you seeing any kind of of of that sluggishness, you know, flow through to your kind of R MNI market and and should we expect that to start to come through at some point. So just really fuse and a bit more color around how you see the RNI. Is it a bit weaker than you may have expected? Thanks. Yes. Thanks, Lee. It's Alan. On the, on the net debt and working capital position, I don't think there's anything really to add to what we said at the half year of the stage. So we said CapEx would be, lower year on year. I said on the working cap side where we had an outflow in the first half that was higher than people have anticipated. That was due to some of the lumpiness of sales in May in June, and we've seen that come back as we'd anticipated. So there's nothing really to add at this stage on the net debt position. Now I'll let John comment on your point on RMI as well, but my view would be that the RMI market's been sluggish throughout the year. I don't think we've seen a change in that trend. We are seeing, London and the Southeast a bit softer than elsewhere. In the UK at this stage. But overall, I'd say it's been more sluggish than the new house build market had been. And I and I think I'll agree with Alan. I actually, you know, we we for my mind, as a business, we've always used housing transactions and consumer confidence as actually sort of lead indicators. And we've been pretty cautious for the rest sort of 18 24 months on on on on the RMI. I think I agree with Alan. It's it's not easy out there. We've got to make sure that we win our share of work. But I think it's going to be challenging, if we see and us in transactions come up, I would echo Alan's point, but I think we are seeing sort of areas of the UK, in Midland, in the north, in the in the west, a little bit stronger than than we would have seen as a traditional heartland of London and the southeast. Okay. But you haven't seen anybody kind of delay in the increased caution around imminent Brexit or anything, any delays recently? The RMI by its nature is, you know, mass numbers. And, and we're not seeing any, anything different, but to Alan's point, I think you've been in a quieter RMI market now for some time. Okay. That's really helpful. Thanks very much. There's another question from Kevin Kamak of Central Security is Kevin. Your line is now open. Please go ahead. I think I've I've got one specific, and I think sort of 2 slightly more general questions, if that's okay. Just on the specifics, the the the q 3 pulled back on plumbing and heating, you know, you've always sort of flagged it to be expected, but is it possible to just give us a sense of of what sort of run rate that might be able to on an underlying basis? Or if it's easier to answer the question, what what sort of exit rate at the end of this year would you be happy with? The 2 more general ones are firstly on Kitchens, I mean, it's quite a sort of unusually confusing backdrop amongst the competition, surprising action from B And Q. Nobody really knows what home base will be, but I suspect they'll reverse the flat pack decision. And you've got howdens, which have been maneuvering away in the background. I just wonder tactically what you're doing, you know, how you're presenting your Kitchen offer this time around, bearing in mind that this time a year ago, it didn't quite come off what you did in in terms of, you know, your tactical position on kitchens. I just wonder if you can explain that to us as of today. And the last one, which may be sort of, you know, well, well out into the distance, but how much of an issue would it be for you you know, either there's an opportunity or a threat if if the off-site off-site manufacturing of volumetric, house building takes off. Okay. Good questions as usual, Kevin. Alan, do you have a review of them, Robin? Right? On P and H, you know, my flippant response, Kevin, is it may have attenuated, but I'd take 14.8 percent, like for like, the other week. Thank you. The more serious answer is clearly there's some help from, competitor actions, but there's also a very large dose of our own activity that we're taking within that. So I think the other thing is I would point you to the total sales starting to be more of an indicator because we will start to cycle the periods, when we closed a lot of branches. I just thought if you're if you think about the maturity of that market and you see a mid single digit go forward sort of position, that would be, a good position to be in for the Plumbing and Heating cattle group. But obviously, we would obviously target Tanya and more. But I think Alan's right. In terms of the kitchen, you're right, Kevin, there's some sort of, the market does need to settle down a little bit with BNQs exit of things in installed element of kitchens. Obviously, the other one I'd throw in the mix is Ren who's growing significantly. Finding the appropriate go to market customer journey, whatever we want to call it, approach for Wix is really important. We've grown the business. We've doubled the business in the last 3 or 4 years and getting the balance of promotional activity and the whole customer journey in terms of the design, the delivery, the install, because over over 50% of the kitchens that we're selling, you install as well, is really important. At the moment, we think we're in an outside spot. As we sort of like that the orders are improving as we speak, but that won't be really realized until 2019. But our aim is to offer customers great value for money and a great service. And I think we'll find our own niche in that. We are now the only as we speak, we own DIY chain to offer, installed kitchens, and with a design facility. So we're hoping to make progress on that as we move into 2019. Do do you have any capacity constraints? In that in that delivery? I mean Not not really. No. No. I mean, we we we we don't. I mean, no. I mean, to pass to be there is a degree of flexibility in the capacity we are, you know, you rightsize your cost base to the volumes. We we we we've got a good facility in Northampton that's dedicated to kitchen delivery and consolidating, and, that can be from itself. Should we need to Slightly more. I suppose I was referring more specifically to the installers. So so the installer side of it is actually been sort of helped by, by BNQ withdrawing, you know, we've employed nearly 100 of their top designers and some of their their installed team. So we've we've got any given time, we've got the 18,021,000 installation teams in different order for install. And to be fair, we're in a bit better position because of the unkeez withdrawal. And with regard off-site, it's a great subject Kevin, you know, we watch it with great interest. I think, inevitably when you've got something being made on a repetitive, repetitive basis, there is this advantage of building it in a better circumstances or climate or environment and and then shipping it to the site and installing it faster. Cost is is a quite big challenge for off-site, and trying to bridge the cost, the cost gap between making it off-site and making it on-site is remains remains a good challenge. We watch with great interest and where we can participate we will, but I will remind you that the vast majority of our business still focuses on the extensions and the improvements to people's homes and the RNI market rather than the sort of new build, whether the off-site is likely to be stronger in penetration. We do have a question from Clyde Lewis of Piyush Hunt. Clyde, your line is now open. Please go ahead. Morning, John. Morning. Hi. Good morning. Hi. You're well? Yep. Yep. Very good. Thank you. Good. Good. 3 for me. One, can you maybe just sort of share a little bit on on how you're going on with all the the IT projects and and how they're progressing at the moment? Second one was on RDCs, again, so the sort of question in terms of just a little bit of an update as to how they're performing. And the third one was on, onto the weather. I mean, it's not a timely year where we normally talk about weather, but it has been pretty mild through through most of Q3. Pretty good weather with limited sort of, you know, rain and and any sort of difficult conditions, has that been an impact at all on your numbers in any shape or form? Well, I I think the the weather impact has been relatively benign through the last few months compared to what we saw. I think what what we picked up from speaking to suppliers, competitors generally with the August with a a bit soft. So, and we weren't different from that, but you know, I think overall, Q3 is probably leveled out a bit more than the the, the ups and downs that we saw during the first half. On the IT projects, we're we're still on track for our our first deployment as the ERP solution in the first quarter of 2019. We're continuing to make the investments in the digital side as well, across the group. So I think, generally, we we feel like we're on track there. It's it's hard going, but I don't think there's anything I'd want to draw your attention to at this stage. And then on in terms of the, the supply chain side, and if I talk about the heavy side range tankers. I don't think we've seen a particular change in trend given the overall, volume softness in the in the market at the stage. Okay. Thanks a lot, guys. Needless to say, Tony continues to point out to us. This is the model distortion that we've had. On on record, and you could see that in the sales numbers. Yes. We have another question from Paul Checkett from Barclays. Paul, your line is now open. Please go ahead. Morning guys. I've got a 3, please. Hi. The first is on Toolstation. I think in the first also discussed that the profits will lower due to the investment that was going in. How are you expecting full year profitability to compare year on year? The second one, can I just check, are you are you still on track to do about $25,000,000 of property profits in the year? And then The last question is more general, which is we've seen more private equity ownership in the sector over the last few years. And it looks like that may well be set to continue How do you feel when how do you find they tend to behave as owners compared to the previous owners? Maybe give us a sense of whether when you see those announcements go out, whether or not it's a grown or you'd feel like they're disciplined, and that's the 3. Thanks. Okay. On Toolstation, Paul, I'm not going to give you the profit number. What I will say is we had We had a record day yesterday, which is, significant as we just launched a new catalog and obviously, as Alan said, the rental difficulty needs, outlets. It's trading very strong. We did have to absorb, obviously, the 40 new branches and a new distribution center that we're which allows us to grow up to sort of 500 units, as we expand the network. The profit of this business will ebb and flow as we put the infrastructure and investments in, but underlying is trading really, really well. Earlier, we mentioned that property profits are still in sort of line of $25,000,000. And private equity question is really interesting, Paul, because In the main, I think it's really good for the sector and, the feedback I'm getting from those that have been involved with the private to join in their business has been quite positive and really good. So, I think we're in the sectors will benefit from that that involvement. Is that because they're quite disciplined on price? Is it I mean, they they they certainly want their return. Okay. Thanks very much. Alright, Paul. There's another question from Howard Seymour of Numis Securities. Howard, your line is now open. Please go ahead. Thank you. Good morning, gents. Hi, Howard. Morning. Morning. Come from me if I if I'm here. So firstly, and and and both quite general, actually. Firstly, Given, obviously, there's a lot of chat in the industry about, cost recovery, etcetera, John. I'm wondering if that changes the dynamic from a materials point of view. Are you people looking to try and get price increases through in the second half as opposed to traditionally in the first quarter? And secondly, you alluded before to the moderation in pricing in the contracts division. Is that purely a function again of the sort of the the commodity prices are easy more that, people are looking at price movements again in the context of market share movements? I think, the whole area hours of cost cost recovery pass through or whatever we want to call it, is tricky because it is not single dimension. You can push the prices up that you'll lose volume with certain customers. And I think what Frank can contracts team because they've got quite a high concentration of customers in each of the 3 businesses. They work alongside them effectively free, and make sure that they're aligned in terms of the overall value and service proposition. It's a bit harder when you're into consumer and and and general merchanting with with a high element of a small tradesman that they tend to wanna trade or trade So I think if you move into any period, you said you're still up, and you're trading stance in to which you feel is the most effective that you have to be agile and flexible in terms of responding to to volumes and and and and ultimately, it's down to pounds growth profit generated from from from from from their sales rather than than the volume and price mix. If you remember Howard, there was a second wave of price increases going on in the second half for the contract merchanting businesses last year, copper, but also things like the chemicals in the insulation market, we have seen some of that attenuate. And indeed, we've seen some of the suppliers come back with modest price reductions compared with where they were as those markets have stabilized. There are still some materials, though. In certain categories where, we're on allocation with with suppliers. There are, you know, there are still tightnesses in the market. I think the material point though is it's not impacting the margin within the business. Okay. That's great. Good luck. Thank you. On the line. John, I'll hand back to you for any further remarks. No. Then just really a big thank you to everyone, and, we'll we'll see you shortly. Take care. Bye bye. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines. Have a lovely day.