Travis Perkins plc (LON:TPK)

Investor Day 2018

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Dec 4, 2018

So good morning, ladies and gentlemen. My name is Stuart Chambers. I'm the Chairman of Travis Perkins Group Plc. It's my pleasure to welcome you and to give some opening remarks to our Capital Markets Day today. Now when I joined my fellow Board members on this Board in Q4 of last year, we were on a journey kind of 5 years into a journey where the direction for that journey had been set back in 2013. And since then, we've taken the opportunity to take stock. And as a Board, we've sat back and looked at what we are, what we have, things that have gone well over that 5 years, things which have perhaps not gone as well and really reflected on those aspects and also thinking about what's important for us to focus on to get the next 5 to 10 right. And if I just comment on a few of those perspectives and those thoughts. So we have a strong group with a good collection of businesses. Some of those businesses have leading market positions and some of them are in markets with very good long term prospects. Our people have an excellent spirit. There's a very strong culture running through Travis Perkins Group and a very positive one, and we have a robust balance sheet. And if we look at all of that, we have very strong base on which to grow. However, a couple of comments on performance. Again, several of our businesses have performed very well over that full 5 years. Some of them performed well for perhaps 3 of the 5 and have stalled of late. So on performance, some good, but a mixed few. And then what have we got concerns about? Over many years, Thomas Perkins Group has become quite complicated. And with that, has been a hope, if you like, for a benefit of scale. And there is some, but the complexity outweighs that on our view. And as a result of that, we've allowed costs to climb ahead of sales in some areas, the opposite of the leverage that we ought to be gunning for. And our purpose has become diluted, and focus has suffered. So what do we, therefore, believe about the future? We believe it's really important to re state for ourselves and for, obviously, any current or prospective future shareholders what sort of a journey are we going to be on for the next 5 to 10 years and what are the strengths in terms of businesses and market positions and strong ideas that we're going to back and we're going to focus on. And our view as a board is if you want to win in any almost any marketplace today, you need a relentless focus on those businesses that you're going to win with, and that's become quite challenging for us. So today, it's not about detail. It's about sharing with you the journey that we are on and we believe we need to take and a journey we hope you'll join us on. So this is the running order. After these opening remarks, I'll hand over to John, and you can see there the running order as proposed. I think the plan is to talk for about 1.5 hour, John, and then to open up for Q and As and then finish in time for those who can stay and join us for a bite to eat, please do. That would be great. But obviously, if you need to shoot off, we'll understand. And please be in no doubt that, as I said, this is not about any knee jerks to the short term situation, the challenging markets we're in, in the U. K. Based on some factors beyond all of our controls. This is thought through, and this is our medium- and long term approach. John? Thank you very much, Stuart. Good morning, everyone. Just really echoing Stuart's excellent setup for us today. This is not a 5 minute knee jerk reaction to our performance. We've been planning and thinking this through for some time. And I've got to say, from my point of view, Tony's and Alan's, this is an exciting opportunity for the group. I'm going to talk briefly around the rationale for the change. What are we going to do? Tony isn't going to be executed, but it's how we're going to execute the project or the plan. Alan is going to talk around the benefits of simplification, which is a key part of the plan. And then there's a bit of a wrap up and obviously get into Q and A. We have other investors and sell side analysts on the phone, so we will go to the phones after we've exhausted questions on the floor here. So in terms of the rationale and just take a little bit of time to position, you've heard me for many years talk around the fundamentals for our market. The U. K. Needs many, many more new homes and our 27,000,000 or so existing houses need improving. And therefore, we believe the fundamentals for the sector remain very strong. We're seeing across society a stronger willingness to use tradespeople to complete that work. And although we believe the long term fundamentals for our sector remain strong, We are clearly in a period of uncertainty. And ideally, this is not an ideal time, but we feel important enough to raise our future thinking as we go forward. Within the period of what we've reviewed, so 2013, which seems a really long time ago, we've seen a growth of the market disruptors such as our own tool station, Screwfix and Selco. The group, as Stuart aptly put, has grown its sales over the period, and we'll give a little bit more detail of this pretty well over the period, but profits have not grown in line with expectations. Costs and principally driven by investments to grow the business have outweighed our sales growth in the last especially in the last couple of years. And because we've got so many opportunities across the network of businesses, we've spread our capital a little bit thin if we're reflecting. However, despite that, as against Stuart raised in the introduction, we've got many businesses that have very, very strong and positive market positions. Many of them are either number 1 or number 2 in their sectors. But by nature, we have got too many businesses to be able to truly talk about a focus and develop. And when we do focus on our businesses, we get higher performance. I will talk a little bit more about it through the presentation, but certainly over the last few years where we were challenging ourselves to use our scale to our advantage across the group, I think much more now about exploiting the individual business scale rather than the group scale. And we'll try and explain why that is as we move through the presentation. If we take a sort of step back to 5 years really to the day when we outlined our 5 year plan, it was on 4 strands, those that you will hear, around customer innovation, optimizing the network that we had and wanted to grow, using our group position and their scale to our advantage and portfolio management and how we conduct ourselves and run our business. I think overall, we've done really well with the customer innovation. We have a leading edge extended heavyside range with nationallightside distribution. When we take a look at the businesses Frank Elkins runs in contracts, our BSS, CCF and Keyline businesses, Over that period, they have done extremely well and growing their sales and focused on the projects and working together. And in that same period, we've grown our online business to now over €300,000,000 across the group. I think we've done pretty well with some of our site optimization with implants, with trade parks, and we've been growing the Toolstation business consistently over that period and whilst at the same time rightsizing our contracts network. Scale advantage, there were there are definite wins in the scale of the group. But in and around the buy in, and we'll talk about that a little bit more, is proved to be much harder to get the traction from our size. However, I would highlight really good progress with our own label businesses. We run through our plumbing business. The Iflo brand is probably the 2nd largest selling brand of sanitary ware in the U. K. Now. And we've developed and we're very proud of a sector leading apprenticeship program to help fund our pipeline of real talented people coming into the group. If I look step back and sort of take some of the challenges we've had in the period, and I think ultimately, I want to be on our front foot, but we do need to be honest. Some of the external challenges outside our control, clearly, the referendum, not confidence of the consumer, and we've seen that feed through with weaker RMI sales. Why is that important? It is the biggest driver of our mix merchant, the Travis Perkins brand, the green and gold, RMI being absolutely the big driver. We've seen the independents organize themselves much better with buying groups, which has very much closed the gap on the national operators of Saint Gobain, Grafton and Travis Perkins. It's in the suppliers' interest to keep all of us in the game. And that organization through buying groups has definitely made it more difficult to get the buying advantages And as I've touched on, the growth of the disruptors. The internal challenges are sadly a little bit of our making. As we've grown and wanted to increase the performance of the business, we put costs in for good initiatives, but we have created a higher degree of complexity. Now that's not a situation that the group can't deal with complex product problems. I think we do deal with that really well. But what complexity creates is slower decisions and challenges on capital allocation and how we run the organization at the front end of the business. Because of the way we've organized with the 4 divisions, Clyde Lewis said publicly about 3 years ago, can they ever fire on all 4 cylinders? And that haunts me on an ongoing basis. And but something that we need to rise to as a challenge, whether it's our plumbing and heating business or our wicks business or our general merchant in, we found it difficult to get all 4 really firing on an optimum basis. And the challenges which we've touched on around cost and capital allocation have been a real challenge during that period. Let me stress that these numbers, we've pulled together from a number of sources of data. We think they're pretty accurate, but I just wanted to put that sort of health warning that they're our numbers. And what they tried to actually look at is what the market size was, the addressable market size was in 2013 and what we think it was in 2017. And broadly, we would say that the market grew in that period by about €8,000,000,000 to €58,000,000,000 in 2017. And as we would know, the most of that growth happened in the first half of that period with a slowing down through 'sixteen and 'seventeen. The significant takeouts from this slide has been the compression of the retail sector from 27% to 23%. The doubling of growth of online, although I think some of those challenges are now proving difficult, and the growth and the clearer growth trajectory of the fixed price operators of Toolstation, Screwfix and Selco. Interestingly, we would estimate that the general merchants has grown from 22% to 23% in that period and specialist merchants, which we definitely contributed to that growth from 27 to 28. And there's a big slice of the addressable market, which we call direct to site, which is primarily an administration element of us being a third party and offering credit to our customers direct to site via distributors and merchants has stayed steady at 19%. I think the important takeout from that is our businesses are very well positioned going forward as we look at the landscape of trade businesses growing faster than the consumer and retail. So on a really for me optimism on a positive note, we have optimism for the future. Those fundamentals of our housing stock remain robust. Our merchant share, whether a specialist or general merchant continues to grow, we've got significant opportunities in that environment to grow our trade businesses with our customers. And as we sit and view where we are in the cycle, our businesses are generally better invested than the competition, which bodes well for the future. Over the 5 year period, Tony in the early stages and obviously Alan in the last couple of years have developed a much stronger balance sheet, which gives us a strong and stable platform for the next period. And we believe that there are great opportunities to drive our sales, profits and cash flows as we go forward. As Stuart said, the as a new Chairman and the Board challenged Tony, Alan and myself in terms of the way forward. We've been obviously in good dialogue and discussion, But we came really with a simple approach of 2 main themes: that we would focus as a purpose, we would focus on our trade and our trade customers. And as an enabler to making that happen, we would aim to simplify how we operate as a group. This was very much around developing businesses that are very well placed to win in the marketplaces that we've identified and positioning the group for an enhanced returns over the longer term. If we take those two themes in a little bit more detail, focus on the trade and simplify how we operate our businesses. This diagram attempts to sort of highlight the bias that the group has to the trades customer, albeit we serve as small, medium and large tradesmen. But in that cluster near the center is the core of our businesses. Trade is our heartland. And what we've observed over the last cycle is margins are more resilient in the trade than they are in consumer, albeit we accept the trade is cyclical, as everyone will know. But actually, with the 2 key indicators of housing transactions and consumer confidence, we believe it's more predictable. We accept customers. And if you ask any builder what's the most important thing, they will tell you it's price, but they do recognize the value for good service to support that price. We can the trend from DIY to do it for me is being taken up by the trade channels. And clearly, we are in a very good position to take advantage of that. And although still in its infancy, digital and I talk about digital in the electronic customer experience rather than just web trading is an untapped opportunity that we believe over the medium term we can actually fulfill the potential and differentiate ourselves as we trade with our customers. The simplification on the group is was quite a big challenge. I've been lucky enough to be with the group for 40 years and been heavily involved in most of the major acquisitions. They are all like my own children and I love them dearly. So it's very difficult when you actually then have to start making some quite tough decisions. So we didn't come to these decisions lightly. And it is our intent for purposes of simplification to divest our Plumbing and Heating business. If those were with us a couple of years ago, we said we needed to stabilize and start growing the business and improving its returns with the view of giving us our optionality. And we, over the coming period, will explore opportunities at the right price, and I will stress, at the right price, look to divest our Plumbing and Heating business to simplify our business and allow us to organize ourselves in a more operational simple way. As part of that simplification equally is our attention on our Wickes business. Over the 3 years from 2014 to the end of 2017, we demonstrably grew that business in a challenging market. DIY, as we all know, is very, very difficult. And over the short term, I think it will remain quite difficult as we see the struggles at Homebase and the struggles that we're seeing come through with Kingfisher's B and Q. However, our plan, again, following in the tracks of Plumbing and Heating, we'll aim to develop a better plan to improve our performance, which over the medium term gives the group our options of what to do with the business. This whole area of reducing complexity for us has got to be part of our religion, simplifying our operational model. As I say in merchant terms, we buy, we stock, we sell, and we've got to really make that easy for our branch managers and branch teams. Reduce the above branch cost and some of the complexity that, that creates and as a major enabler in our sector, develop leading or sector leading IT capability that can interface with the customer for the future and today. Part of this simplification, as I say, is to divest Plumbing and Heating. And again, I do stress only if we can get a realistic value for the business. Tony and the team have done a fantastic job in terms of the transformation of the plan and focused on one network, one management team in the branch network. We've it's driven hard the online and digital businesses, especially around the DHS and the newly acquired business of National Spares and the underfloor heating business. And our wholesale business under Jed Kendrick and Tony has achieved very strong market growth and now is sector leader in that wholesale market. It enables us to concentrate on higher long term return in businesses. Equally, it allows us to focus harder on some of the advantaged businesses that at the moment perhaps do not get as much attention as they should have done, and it enables more simplification and cost reduction across the group. As we touched on Wickes, I think Wickes continues to be a very strong business in a very challenged market. Our aim really is to encourage a recovery of our performance and respond to the market environment. As I said, I feel that we short term, those challenges will prove quite difficult. However, we do believe that we are competitively advantaged in that market in the sense that against our DIY competitors, we have the best value price model. We have an excellent customer mix of a third tradesman, a third DIY and a third do it for me in our installations. We now install 6 out of every 10 kitchens that we sell. We've got a great network of about 230 stores that are smaller footprint with a tight SKU assortment and a market leading online digital business. That gives us a real opportunity to push hard and develop a sector leading performance in that market as we see the Homebase and B and Q's strategies unfold. So actually, really for us, there are sort of 3 themes in the sense of enablers. It's a focus on the trade and trade customers. There's the divestment of Plumbing and Heating and creating the optionality of Wickes as we go forward. That will allow us a stronger focus on our capital allocation, faster decision making across the business and an overhead reduction on our cost to serve. This is very much around simplifying our businesses to improve returns over the longer term. I'm going to pass on to Tony, who's going to talk about some of the how to execute those plans. So first of all, thank you, John. Thank you all for coming today. So yes, thank you very much for coming, and it's good to see some familiar faces. Building on John's comments in terms of focus, I'm going to take you through in a bit more detail our tool station and contracts businesses. But before I do that, I wanted to take you through the three dimensions of how we think about our businesses. That's firstly, in terms of customers secondly, how we build better propositions and then thirdly, how we leverage competitive advantage. In terms of our customers, it all starts in having a very clear view of who they are. We have a deep understanding of their needs. And with fewer businesses in the portfolio, we can sharpen our focus further. In our large contract businesses, we have personal relationships with our customers. In our businesses, serving smaller customers like Toolstation, we've increasingly strong digital relationships. And we believe, as John mentioned earlier, that the benefit of those two things is that strong personal relationships and strong digital relationships we can bring to bear on the Travis Perkins Green and Gold business going forward. We do though need to monitor changes in customer behavior constantly, and this is more acute at the smaller end of the customer base. In serving our customers, our branch culture is at the heart of what we do. We must listen even more intently to our customers and to our people and ensure that we've created the conditions for our teams to sell and be rewarded for doing so. In terms of our propositions, our aim is to have businesses which outperform in any market conditions. And I think we've ably demonstrated that in certain parts of the business over the last 4 years. Contracts are going very well both BSS, CCF and Keyline. We've outperformed in the tool station businesses and more recently in P and H. But we do recognize there is more to do in both Wickes and the Green and Gold. We think about our propositions in 4 different dimensions in terms of value, range, service and convenience. The balance of each of these is different across our businesses depending on the various needs of our customers. And that's why it's so important that our management teams are responsible not just for the proposition in the business, but the cost, the capital and the infrastructure they deploy to meet those customer needs. And then the final column on this page is Vantage Business Models. We have many advantages, but the most significant is our people. We have highly engaged teams in many parts of our business, and we need to further empower and incentivize, in particular, our branch teams in their local catchments. We have branch networks and supply chains which are very hard to replicate. Finally, then we know there is more we can do with technology to both improve our propositions and drive efficiency for shareholders. What I'll try to do on the next couple of slides is really graphically articulate where our businesses operate in their respective markets. So along the top, you'll see our key customer trades. So starting with Groundworks and Civils through some of our light side customer types. And on the left hand side, you can see our customer size ranging from small at the top of the page to large at the bottom. I'll start with our specialist businesses, which serve narrow groups of customers with specialist products each in one segment of the market. Keyline supplies Civil and Groundworks products to large customers And similarly, CCF also focuses on large customers, but in the insulation and drylining space. BSS supplies industrial plumbing and heating systems to a specialized group of customers and extends slightly further down the chain in terms of customer size. Benchmarks focuses on kitchens and sells to local specialist joiners and kitchen fitters. Because these customers tend to operate locally rather than regionally or nationally, they need a local service point which is why we have more branches in benchmarks than in our 3 other specialist businesses. And that's similar to Toolstation. Toolstation operates with a wide range of light side plumbing and electrical products with what we would argue is a laser like focus on local trade professionals, cash based jobbing trades men and women and serious DIY customers. Toolstation is not a product specialist, but we would describe it as a small trade customer specialist. Travis Perkins is clearly a broader church and covers a much wider product range providing general builders with all of the products they need to complete building work on a local, regional and in selected categories on a national basis. So turning to Toolstation in more detail. But before I run through how we think about Toolstation, why it's such a powerful, replicable and exportable business model. I think it's important to recognize the contribution of Mark Goddard Watts, who founded the business and has now been working with us for over a decade. I'd also like to recognize the great work that Lucy Lynch, Darren Murray in Europe and James Mackenzie in the U. K. And all of our teams are doing to make this such a fabulous success story for Travis Perkins. And by way of context, I thought I'd start by reiterating who our customers are. We have, as I briefly mentioned, 3 different groups of customers professional local tradesmen and women, cash based or largely cash based jobbing builders and DIY customers. And it's the combination of these 3 customer groups that makes our business so powerful. Well, why is that? In the first instance, with DIY customers, they tend to buy more on the weekend. Trade customers tend to buy more during the weekday. But because we have that combination of customers, it enables us to open all over the weekend and it also enables us to open for longer hours. And that provides disproportionate advantage to our trade customers who can then buy products out of normal merchant trading hours. So I'll try and step you through each of the elements of what customers need and how we try and satisfy that with our proposition. So the first one is value. Our customers say to us they want fixed consistent low prices. We are the value leader, and we believe we have anything between a 10% percent and north of 20 percent price advantage to our nearest competitors. In terms of range, they demand a wide in shop range, trade quality products and near perfect availability. We offer 12,000 products in store. We've now extended our online ranges by 3,000 products. And we work on north of 98% availability. And in many of our stores, that's north of 98% at 99%. In terms of service for local trades men and women it's important that they can get into the branch and get out quickly. So we have a fast in store service. They demand online product search and trade credit. In terms of our proposition, our ambition is to serve all of our customers inside 3 minutes. And when we're not busy in the branch, it's possible to get in and out in 2 minutes. And time is money for these customers, so that's really important. We have, of course, an online site, and that's important for customers in terms of searching for products. But we also have a catalog. And many people say to us, why do you still have it? The reason we still have it is because our trade customers really value it. If they're on-site and they're in a van or they're on their T break, what they will do is they will flick through and look for product they need either in day or for next day. We've also recently launched a Toolstation traded credit card, which has seen really strong uptake from our customers in July or from July this year. In terms of convenience, our customers demand long opening hours, delivery flexibility, nationwide shops because they want a local service and increasingly click and collect. And what do we provide? We provide opening hours up to 90 hours a week in London. We offer free delivery on all orders over £10 and that can be to home, to site or indeed back into the shops. We now have 3 30 branches nationwide and click and collect in less than 10 minutes. And in reality pragmatically customers can sit in the car park order product and then come in and pick it up from the branch because we almost instantaneously pick the product. Does this proposition translate into a competitive advantage for shareholders? Well, there are 2 dimensions. The first is that we're low cost and capital light. We have very small shops and they're increasingly getting smaller. So we'll be opening more shops in London as you'd expect. Our shop in Putney which will open in Q1 next year will be around 2,700 square feet, which is almost half the size of what we've opened in the past. But that will have a full range of product. We have a simple fit out at low cost. It costs us around £150,000 to fit out a shop. We have open source IT platforms, so we pay virtually no license fees for our software. And we have unique stock debt. What do I mean by that? I mean in some of our branches which might be might have more plumbing customers, we will hold the same plumbing range, but we'll have a deeper depth of stock in those plumbing products. Similarly, a branch which has more electricians will hold again the same range of stock, but have deeper depth of stock in electrical product. In terms of formulaic efficiency, I've often described and probably to some of you that Toolstation feels sometimes like an IT system and process that happens to sell building materials. But that is the real strength in the business. We have a uniform shop range. So our teams cannot extend beyond that range. But what that enables us to do is be very, very efficient in terms of our buying capability. So if I give you a proxy, grocery business in the U. K. Would hold somewhere in the order of 25,000 to 30,000 SKUs and probably have around 100 buyers. We stock 12,000 products. So on that ratio, you'd expect us to have 40 to 50 buyers. We actually have 5. And that's because the system generates helps us generate ranging. Our in shop logistics are pretty neat. We move product when they're in season from the back of shop to front of shop, so we increase the speed of picking for our customers. And when it moves out of season, we'll move it back farther in the shop. We have auto replenishment systems into our DC and into our shops. And we have what I described as almost automatic ranging. What do I mean by that? When we launch our catalog, our wrap up, our post audit of each catalog, the system will generate for us those items which have a low rate of sale and are not purchased by our most valuable customers. So it provides to the buyer a sense of the products which we should delete or think of re ranging in the next catalog. And we have intuitive systems. So our ambition is to get our new team members into our business serving customers within an hour. I know that to be true because my daughter did spend a little bit of time working in the Derby store this summer and she was serving customers within an hour. So what has our performance been like? On the left hand side of this chart, you'll see our sales growth over the last 8 years. Obviously pleased that we delivered such strong sales growth at 23% compound annual growth rate. That's been driven by 4 things. Firstly, new shop opening secondly, shop maturity thirdly, our growth in online sales and fourthly, more recently, the improvements we've been making to the proposition. As you know, we've been very consistent in our message. Given our start point and you can see it on this chart with just over €50,000,000 of sales back in 2010, we needed to accelerate shop opening to avoid catchment lockout. And then and only then could we meaningfully focus on improving our proposition and utilize the scale we've developed. And that's we believe exactly what we've done. Of course, these relatively higher levels of shop and distribution center investments in recent years have moderated our profit growth to around 10% per year. But with shops maturing, online expansion and proposition improvements, our like for like growth is accelerating to double digit levels, outperforming our nearest competitors and we expect this to continue for the foreseeable future. On the right hand side of the chart, you'll see our online growth. That's accelerated from high single digit levels in 2016 to north of 25% this year. And what we're seeing is really interesting. You can see it on the chart. In terms of the shop range, we started and had a shop range of around 12,000 products until 2016. But in the last 2 years, we've extended that online range by around 3,000 products. And as you'd expect, that's driving our online growth. But what it's also doing is customers are ordering that product for click and collect, going into shops. And when they go in, they buy more products when they're in the shop. So it's also driving our shop like for like growth. As we add more shops, we add more customers. We're adding gross about 100,000 customers a month at the moment. So we add more customers into the business. They also buy online, which further accelerates our online growth. So we're seeing this really interesting phenomena where the more we extend range online, the faster online grows. The more op shops we open, the faster online grows and the faster our shops grow. Looking forward a little bit in Toolstation in the U. K, and I think this applies to the European business as well. But starting in the U. K, our key customers are our trade customers. They're our high value customers, and they buy from us frequently. So we've got to ensure that we focus on their needs. And over the last 18 months, we've been improving our trade credible ranges and extending ranges online as I mentioned earlier. We are the value leader. We want to maintain and enhance that value leadership. And through 2019, you'll see us more intensively communicate our value advantage. In terms of range, we've already landed 3,000 products online. We expect there to be another 15,000 products we can put online over the next 3 or 4 years. Digital is, of course, becoming increasingly important to us. We have a new website and that will launch in December this year. It's ready, tested, and we could have launched it earlier, but of course October, November are key trading periods for us. We also have 3 1,000,000 registered customers in Toolstation. That gives us a huge amount of information to understand their buying behavior. And what you'll see from us as we move forward is increasing personalization of offers, particularly to our trade customers in terms of giving them relevant products at relevant prices, which they need. We've been opening shops at around 40 a year, but we'll accelerate that further in 2019 to north of 50. Our ambition is to get to at least 500 stores in the U. K. And we now with our 3rd distribution center have the physical infrastructure to achieve that. Of course, our business is nothing without our people. And I'm delighted the work that James and Simon Robinson have done in the business over the last 18 months to improve colleague engagement and reduce our labor turnover. I'm also delighted to see the homegrown talent that we've got in the business coming through. We now have people that started on the shop counter, moved to supervisor, to branch manager, to regional manager, and now we have our 1st regional director in the business. That's essential because we do have a tool station way. It's low cost and it's high compliance. And those people, as they move through the business, really understand what our business is about. And I think you might notice that's Courtney Lawes in the middle of the ruck on the bottom left hand corner bottom right hand corner of the slide. We do more things with Northampton Rugby Club opening our branches. But for the Kiwis in the room, and I know there's at least one, I think you'll find that he is behind the back foot on this occasion. So turning to Europe. The first thing to say is that we're really pleased with the work Mark, Darren and the whole team have done in Europe to date. Corporates can sometimes, for a variety of reasons, find it difficult to support start ups. But in this instance, the board recognized the value which can be created and supported management and we are now moving to scale the business much more rapidly. Our European customers are saying exactly what our U. K. Customers are saying to us. They like our low prices, wide ranges, fast service and shop and online convenience. This supports our firm view that we now have a business model which is exportable. If I can point you to the blue box in the middle of the page, it's important to say that all of our European businesses have the same name, same shop operating model, same shop fit out, same distribution model and underpinning systems which are now all cloud based. This gives us a significant head start in taking the business to new geographies and should give us further operating leverage over time. And in terms of our country footprint, it does seem that we can only operate in markets where we have some rotational symmetry around flags. But that aside, in Holland, we're moving to scale rollout, seeing significant like for like growth and online sales per capita in Holland already ahead of the U. K. As we secure 1st mover advantage. We anticipate now opening 25 new shops in 2019 running at a similar rate to the U. K. Some 4 to 5 years ago. In France, we've made a really promising start with new shop maturity at or slightly ahead of the levels we're seeing in Holland. That's giving us huge confidence and we're now working out how we accelerate our expansion in France. In Belgium, we plan to open around 5 shops in 2019 and they'll all be replenished from our new 150,000 square foot Dutch DC. And our online sales interestingly have given us a very, very good understanding of where we should open those first shops. Germany is growing well online and we'll assess shop opening in due course, but we of course do not want to spread ourselves too thinly. Toolstation Europe provides the group a real and significant opportunity to expand internationally without the risks associated with acquiring. Turning to our Specialist Merchant Businesses and back a little closer to home. Again, I'd like to start with the teams, aimly led by Frank Alkins, who's with us today. The business is run by Kieran Griffin in BSS, Dean Pinner in CCF and Paul Beaman in Keyline, and their respective teams have done an outstanding job to enhance their propositions over the last 5 years and outperform their respective markets. I'll talk more about that in a moment. In terms of how we think about our specialist merchants, I've split this page into 2 sections rather than 3. That's because our proposition and our competitive advantage are so intrinsically linked. But before we dive into the detail, it's worth noting that our large customers exhibit very consistent buying behavior and we expect that to continue. E commerce is not a channel they used to buy. So what do our customers expect from us? In terms of value, they purchase significant volumes and therefore they expect competitive pricing. In terms of ranging, they want access to standard, but also specialized ranges because many of the products they install are specified by architects and not chosen by them. In terms of service, they expect on time in full delivery tailored to site demand. And in the major cities in the U. K, we have very short windows of delivery, and our customers do not want their tradesmen and women standing around on-site with no work to do. They want deep technical expertise. And because of the volumes they buy, they want simple account management. They do not want to be continually concerned with inaccuracies on pricing or volume on invoicing. So how does that translate to our propositions and our competitive advantage? The first thing to say is we have large low cost sites nationwide. They tend to be on the edge of town and they tend to be very close to distribution networks. This enables us to offer competitive prices, range breadth, range depth and fast stock turns driving our capital efficiency. In terms of range and service, we have very long standing supplier relationships, again enabling us to access all of the products our customers need. We have specialist fleets for each of our businesses enabling us to give market leading on time and in full delivery. And we have technical experts in all of our branches and we think we have industry leading account management. In summary, the trust we have built with our customers, our long standing supplier contacts, our nationwide networks and specialist delivery fleets cannot be easily replicated. And it's our long term ambition to further integrate our business into our customers and suppliers' supply chains such that we become an ever more integral part of their businesses. So turning to performance, this is a good slide. Taking a step back and looking at the performance of our specialist merchants, we've been very pleased with the results Frank and his team have delivered. Overall, sales have grown at a compound annual rate of 9% over the last 4 years, profits at 6% and because of our branch reductions in Keyline and judicious use of capital in both CCF and BSS, we've increased return on lease adjusted capital from 12% to 14%. Our philosophy in these businesses is quite simple. We want to get close to our customers, closer to our suppliers, grow volume, maintain gross margins, tightly control costs and ensure we have the right capital base. Keyline in the blue on the chart has delivered 11% annual growth in sales despite rebranding 27 branches to the green and gold business in the last 3 or 4 years. BSS has just under a 50% share of its market and as a result sales have grown more modestly. However, returns are up as we have managed the network carefully for productivity. And in CCF, sales have grown by 18% per annum as we've extended our reach across the U. K. And won national framework agreements. It's also worth saying that we further diversified the customer base. We sell into strong and resilient repairs, maintenance and improvement end markets. We have a growing share of new house builder work and we've increased our work in public and industrial markets such as schools, hospitals and prisons, are less exposed to the cycle. In summation, Frank and his team have delivered to the plan they laid out in 2013, but there of course remains more to do. Looking to the future in our specialist merchant businesses, we continue to be encouraged by the momentum we've built and believe that significant opportunity remains. In Keyline, with even more focused account management, we see no reason not to win more business. Our new larger branches enable us to provide even more range breadth and depth for our customers underpinned by higher levels of efficiency. We're extending our civils and drainage capability and plan to do more in the higher space. With more relocations planned, we expect to further improve returns. In BSS, we expect to leverage our technical expertise further helping design end to end fluid transport systems our customers demand. We'll provide more everyday range and extend into heating, ventilation, air conditioning and further into hire as well. We also expect to drive efficiencies through new IT systems over time. In CCF, continuing to foster close customer relationships will stand us in good stead. We are planning further range extensions in insulation and in fixings. Branch opening will be more selective here, but there are still opportunities to infill the network. As we implement best practice in project tracking, fleet efficiency and the digital integration of our business with our customers and suppliers' supply chains, we expect to continue to drive up returns. We are now the market leader in many, if not all of these segments, and we expect to continue to build deep moats around our specialist businesses and drive up returns. With that, I'll hand back to John. Thanks very much, Tony. Some great work from both our specialist businesses and tool station. I want to take a little bit of time to talk about our Green and Gold business. I've always called it the cornerstone of the group. It is the founding business, and the business has generated the cash flows that's allowed the group to grow and make acquisitions that we're very proud of. However, as we know, really since 2016 and the referendum, trading has been more challenged and growth has slowed down. So if we just take a little bit of a step back, It is a large and successful business. It is a sector leader in both scale and performance. Over the period 'thirteen to 'seventeen, it has grown its business at a 6% CAGR. Unfortunately, that has been 2 halves where the first half was very strong growth, the second half has not been so strong. Our recent profitability has been challenged by some of the investments we've made. But when I look around the landscape of mixed merchants and our competition of independents and regional, we can see there is very strong demand for mixed merchants within our market. The sector is attracting quite a lot of private equity investment, which we've seen some transactions in the last 12, 18 months. And despite the slower growth and slower earnings, the customer feedback on Travis Perkins Green and Gold remains very positive. Some of you may be aware that in the last couple of weeks, we've had to change the management in Travis Perkins. Paul Talent and I have been discussing for some time his situation, and he will be retiring at Christmas. Paul goes with my blessing. I've worked with him for 7 years and rate him highly. He's had some challenging times, and he has my best wishes. However, it does give us an opportunity to take stock of the situation, And we're moving into that role, an individual that I actually think is strongest operator within the group. Kieran Griffin has been the 23 year server of the business. He's come through the graduate apprentice program at Keyline. He moved to Travis Perkins around 3 branches, became Regional Director and Regional MD for Travis Perkins before moving as Managing Director of CCF, Managing Director of Keyline and is currently Managing Director of BSS. When he was at Key Lime, we achieved a 7% CAGR at CCF, a double digit. And although you saw from Tony's slide earlier, BSS in that 5 year period is a 1% CAGR. It's running north of double digit this year. Kieran is a very strong merchant operator, and it's now for us to build a strong team around him and focus on the green and gold business. That focus is going to be in 5 areas. It's exploiting the advantages that this business has it's ensuring that we're given the right balance between central control and local empowerment of the branch manager address the customer needs on both service and pricing to win a greater share of our customers' wallet and to recycle capital and to enhance sales, growth and earnings. Using very much the same format that Tony did with these businesses, the customer needs of a general merchant are very much around relationship. And as I think this going forward, that relationship can be both physical at the branch and online and digital. The customers are seeking a one stop shop for all products requirements. They're looking for a merchant to consolidate their orders and deliver them in a timely, flexible manner. Of course, they're looking for competitive pricing, and we need to meet that expectation. They're also looking though for flexible credit to run their business, and they are looking to for extended product range so they can complete their jobs of the more unusual products. Travis Perkins Green and Gold meets all of those expectations. It's got skilled branch staff and sales estimating teams. It's got over 700,000 customers of both a Trade Cash Card and a full ledger or credit account. It operates one of the largest commercial vehicle fleets in the country. Its network of 7 50 branches gives it truly national coverage. And clearly, the width of its product offering from both its supply chain internally of 25,000 products and the wide range of products it serves its customers to meet their needs of north of 125,000 products gives a comprehensive proposition to customers in this space. When we look at Advantages Businesses, we have the ability as a group to attract and retain the very best people. We can act nationally but think locally. We can afford the best sites in town and can utilize that national scale from purchasing. We've got excellent supplier relationships that can develop programs to develop business on both a local and national basis. Our investment in better IT gives us better flexibility to offer credit to our customers, which is an important part of why customers choose their merchants. And as we move forward with our technology program, we will aim to give our customers the best system to serve their customers and it will our colleagues, sorry, and sorry, our colleagues the best system to serve their customers and our customers the best system to buy from us. I just want to pause on this slide because for me, it's absolutely fundamental to us going forward. I believe there's an opportunity to address some of the balance that currently exists within the Travis Perkins Green and Gold balance between central control and local empowerment. I see with lots of branch visits where we have a good site with a good manager, we can win in each catchment. 1 of my old bosses, Frank Mackay, at the time used to talk about having 750 minutei branch managing directors when we had 7 50 branches, really thinking through that, that branch manager And I think when you can move more closer to that model, And I think we can move more closer to that model as we go forward and with the center supporting our branch managers who are closer to our customers. For me, the battle cry is about winning the very best builders in town, and we need to empower those branch managers to support them with both pricing decisions on a local level and stock positions on a local level so they can serve their customers better. Pricing has always attracted a lot of attention, and it would be wrong of me not to address that. In research, when we are talking to customers, they are looking for consistent pricing, 1st and foremost. And our ability should be to be able to address that as a primary approach. We have good pricing systems. We do need to be smarter with those to get them more consistent. We will invest in training of our people to really understand some of those challenges. And obviously, as we move forward with our new IT system, that will give us enhanced control for the branch manager to make those decisions locally. Price perception is really difficult to overcome. We could have situations where we price a customer 40 items, and 39 of them are right priced and one of them is wrong priced and everything gets queried. That takes a long time to overcome. So getting prices right first time is very much part of our plan. We have obviously the opportunity through our trade offers, which now actually is over GBP 100,000,000 of sales, better and more targeted KPI pricing in those local markets and the ability on a self funding basis to get the right volume growth and the right investment to right price categories, especially in the shop area. This is very much around learn and then refine. And the ideal place is going to be a mixed trade merchant that does negotiate on a local basis with their local customers. And when we look at our customers, some research that we've done suggested that a current Travis Perkins customer will spend a broadly 40% of their addressable market with Travis Perkins. And although there may well be 1% on retail and just under 9% on fixed price, there's a 51% that they spend with other distributors and trade merchants, which for my mind and for our is open game to chase to get us the growth. Clearly, those channels are where they're going to come from. It is around winning share. It is winning share from our national competitors and independents. But the most important thing is about winning that in that catchment area that the branch operates. We can complement that sales growth also with a sector leading managed service function that we operate, which is continuing to grow well. Equally, where do we think we can win? I think we can continue to win with a better offering on our core building material offers of bricks blocks into that local market. We have a very good tool hire business that we are seeing good growth and can continue to grow. The own brand products are sort of highlighted here that we've developed and direct sourced at great quality and very competitive rates of Bulleit Ram, MadHog and Punk are seeing really good sales and good customer feedback. And equally, within the timber and sheet materials, which is the heartland and the original product categories for the group, I believe we can bring together better programs to take share and grow our business with our customers. The concept of putting lot more new capital into the business does not seem to be reasonable. So we are looking to recycle capital by extracting capital from our existing estate and where we can actually rightsize a branch in each catchment and actually aim to get better market share and better returns from that activity, which we're now gaining momentum on, and we've got sort of 70 examples of that. And we've announced earlier last week that unfortunately we're required to come off our Tilbury Range Centre site sometime during 2019 as there's been an issue with subsidence on the operating slab of the branch. Now that's going to be subject to a legal dispute. So clearly, I can't comment much further on that. But I have got to stress that does not affect our Warrington Range Centre or Cardiff. This has been a forced issue relating to the operational standards on that site. But with that capital of both managing our estate and on the range centers, it enables us to focus on investing in larger, more efficient branches where there are a lot of, as I call it, chimney parks that give us a greater productivity and efficiency and suiting the sort of operating areas such as Milton Keynes on the bottom photograph, which we're seeing really good market share and growth from investing in that site recently. Stock is also a key component of attracting customers. I think there's opportunities for us to enhance our mandated reins, what each branch that we want to keep, but also give the branch managers much more flexibility over project stops and bespoke products that the customers want locally and tailoring ranges to suit that local market and those local customers. As I said mentioned earlier, the selective credit to our customers, we believe, has got advantages to grow our business and increase our returns. When we look at the sites and the network and our ability to recycle capital to enhance growth, over onefour of our estate has potential to improve via a refit or relocation. When we talk around refits, that's in the cost band of between £300,000 £500,000 And when we relocate, there's generally costs of between £800,000 €1,000,000 The branches that we have over the last 3 or 4 years relocated or invested in are showing a 12% to 13% sales CAGR. So we believe there's real potential within our existing estate to recycle capital and invest behind the green and gold. Today is not about giving guidance on sales and profit outcomes, But I'd encourage you to think of this in terms of volume growth, profits and return on capital and encourage you to think of it in terms of short term and medium term. The short term, we're talking around 2019 to give Kieran an opportunity to bring the team together and be focused on this plan. The medium term, we're talking around the next 2 to 3 years. Short term, we're talking around retuning the engine of green and gold and then moving over the medium term to back to the outperformance that you've seen over a number of years prior to this. Profits short term will be influenced by our ability to take cost above the branch across the network. Longer term, obviously, as we move to higher growth and outperformance of the market, we would expect that to give us operational leverage. Short term returns on capital are going to be relatively flat on the basis that we're recycling capital. But our aim and over the medium term is to definitely return our business to growing the return on capital. So if we step back, it really is those five areas of our green and gold that we aim to win share and grow our earnings and returns in a flat market, exploiting the advantages that currently exist within our green and gold business, the all important for me balancing of central control over local empowerment addressing our customer needs on both service and pricing winning greater share of our customers' share of wallet and recycling capital to enhance growth and returns. And with that, I'm going to pass you back over to I'll pass you to Alan to talk around the benefits of simplification. Thanks, John, and good morning, everyone. So having heard a compelling case from John and Tony and what we plan to do to address the opportunities before us, what I'd now like to do is cover the financial outcomes that we would expect to see as we focus on the business and the trade and simplify the group. So the business plans summarized by John and Tony are designed to ensure we outperform our markets whatever the prevailing market conditions. We'll look to underpin this with better cost control leading to operating cost leverage. We've also passed the anticipated peak in capital expenditure at this stage within the business, and I'll cover our plans for capital in more detail in a little while. Finally, with a simplified and focused group, capital allocation will be improved, and I'll summarize the capital allocation priorities. As you heard from Stuart and John earlier, operating costs have grown significantly as we've invested in the business. During the first part of the plan, as illustrated on the graph, strong volume growth absorbed this overhead increase, resulting in a flat overheads to sales ratio. As revenues growth has slowed since 2016, the ratio of overheads to sales has increased driven by both the return of inflation and ongoing investment. Investment's been driven in particular by the infrastructure investments we've made, so the branch network and the supply chain. The cost increases we've seen, however, have not been within the branches where overheads are tightly controlled. They're more in the above branch structures that we operate to run the group. So we've taken some actions during 2018, notably in Wickes and in general merchanting, and we've delivered €30,000,000 or so of annualized cost actions so far there. As we go forward and reshape the group, including the disposal of the Plumbing and Heating division, we're planning further above branch savings with a target of a further €20,000,000 to €30,000,000 to be realized over the next 18 months or so. Now there will undoubtedly be some onetime expense required to realize these reductions, and I would assume for modeling purposes approximately a 12 month payback. So how should you think about the shape of the P and L in the medium term? Well, as you've already heard, the contract businesses and Toolstation have outperformed their markets in recent years, and we expect this to continue. We're also confident we have the plans to get the green and gold engine moving forwards again. At the total group level, I would expect the gross margin percentage to remain largely unchanged. So there's some investment through pricing, as John described, and there will be a small negative business mix. However, those will be offset by the disposal of the Plumbing and Heating division at a total group level. Given the focus on overheads, coupled with reinvigorating the general merchant, you should see the overhead to sales ratio start to fall back despite the investments in IT, which I'll touch on in a little while. So if we pull all of that together, we expect to see operating profits start to move forward again. If I now think through what does that mean for free cash flow generation within the group, I'd expect this to step up in the medium term, driven principally by the growth in EBITDA and a reduction in capital expenditure as we focus and prioritize. Expressed as a percentage of sales, I would expect working capital to remain pretty steady with absolute investment driven by the growth in sales, so mainly the trade debtor book that we run, with stock on the ground largely funded by trade creditors. We anticipate that investments in freehold property will be funded over the cycle by development proceeds, And I want to come back to this topic in a couple of minutes. So first of all, on IT investment and what on earth are we trying to achieve here. So as we discussed previously, we're investing to replace our core merchanting IT platform, which at this stage is over 35 years old. It's actually a hugely complex IT environment that we run within the group with in total over 400 applications. As we look to simplify the group with the disposal of plumbing and heating and also a program to separate the Wickes retail IT environment from the merchanting businesses, we have an opportunity to further simplify the IT ecosystem beyond the ERP program, which we've already commenced. So this will result in a significant reduction in applications and a huge simplification, moving more applications to the cloud and creating what I would describe as a more variable and scalable IT platform than the current legacy owned data center structure, which we run today. A consequence of this revised approach is that we are going to push back the first deployment of the ARP solution to reduce the go live risk and also to take advantage of these further opportunities to reduce the scale and risk within our IT network. This will also enable us to further derisk the future deployments of the ERP solution. So the simplified end state should be both lower cost and easier to maintain. So what does that end state IT operating model look like? Well, on the left hand side of the chart, you can see a common platform and aligned processes across the 5 merchanting BUs in general and specialist merchanting. There's no change to Toolstation, which Tony described earlier, an open source common solution across the U. K. And Europe businesses. And for Wix, on the right hand side, we'll move to a fully stand alone IT infrastructure suited to the retail business that Wix is. Like merchanting, that will become more cloud hosted in time. As I said earlier, this requires a lot of work to achieve the separation from the current state. However, I do believe it would be worth it to achieve both simplification and support the optionality we described earlier. So why are we talking so much about IT and digital? And where should you expect to see benefits coming through? Well, starting on the enablers. The rebuild of the platform I've just described will provide firm foundations for the business going forwards. Rebuilding onto a modern cloud based architecture under a software as a service model where you get frequent updates. We're intending to refresh the data architecture, ensuring accessible and consistent data is available across the business where it's needed, enabling self-service management information for the right people. This is both cheaper to run and enables us to train our people more quickly in branch and in store. In turn, this facilitates accurate and integrated transaction and stock data, intelligent price management to facilitate the consistency point that John described earlier with relation to Travis Perkins and also quicker sales order entry to enable us to keep the queues moving at the counter during busy times, all of that resulting into a better service for our trade customers. Then on top of the IT platform, we can build better digital tools for our customers and colleagues. These become cheaper to build, accessing the modern service based architecture, and we'll use the higher quality data that's provided by better core systems. They enable e commerce, which can be tailored and appropriate for the customer. They give our customers the ability to see stock status and delivery status in real time, and they also enable us to work collaboratively with customers on quotes and on their projects, enabling mobile working whether in the yard or out with our customers, all with real time consistent data. So there are real benefits here: a cheaper platform, more efficient branches with sales order processing and dispatch working well and reduced administrative activity within the branch. There's less rework and more time to service customers. The proposition has become stickier, enabling us to capture a greater share of wallet, and it's quicker to train our people. So what's the cost of this program? Approximately €40,000,000 to €50,000,000 a year over the next 3 years, and then I would expect to see this profile reducing over time. I mentioned a couple of minutes ago I'd cover Freehold's property investments and the value that we generate from the property portfolio in more detail. So I would expect that freehold property investment will continue to be self financing in the coming years. In fact, when you look back, this has been the case since 2013. Whilst we've invested GBP 350,000,000 in our freehold property estate over that period, it's been entirely financed by disposals. At the same time, the group has generated over £114,000,000 in disposal profits in the period 2013 to 2017. Over 80% of these profits have been delivered through development of the network with, by definition, only a small proportion coming from sale and leaseback activity. That sale and leaseback program is now largely complete, and it covered the Wickes retail estate. And the reason we did that is because we feel we'll see little to no inflation in retail rents. However, we do expect to see increasing inflation within industrial rents, so it's important that we can own the best sites from which we operate for the very long term. On the right hand side of this slide, you'll see a chart which shows an estimate of market value of the property portfolio, put together by our own surveyors compared to the net book value. What this chart is showing you is that over time, the GAAP continues to grow, meaning that there's significant and growing unrealized value in the property portfolio within the group's balance sheet. Coupled with a good pipeline of development opportunities, this gives me confidence in the ongoing generation of around £20,000,000 per annum of property profits into the future. Now in Stuart's opening remarks, he mentioned the strong and strengthening balance sheet, and John also touched on that. And you can see that illustrated over the period from 2011 to 2017 on this chart. This is particularly important to maintain in the uncertain economic times we're currently traversing. The balance sheet will strengthen further as a result of the plans that we're setting out today, providing us further flexibility and options into the future. So what I've done now is pull together on one slide the capital allocation priorities I've just tried to describe for you. So focus and simplification leading to a reduction in capital expenditure. For modeling purposes, I'd expect maintenance CapEx to run at around £60,000,000 a year. Our priorities are to main growth and investments in Toolstation U. K. And increasingly in Europe and modest enhancements of the specialist merchanting businesses. As John described, we'd expect the investments in the Green and Gold Estate to be largely self financing. And I've put here the IT investments I referred to earlier as well. So we'd expect to grow the return on capital employed in the group with 2 drivers, both earnings momentum and enhanced capital allocation as we move forwards. The board follows a progressive dividend policy, which is underpinned by the strong cash generation, which I've outlined. We're also intending to maintain that target for lease adjusted net debt to EBITDAR of 2.5x, which will ultimately provide scope for enhanced returns for shareholders. So before inviting questions, I'd like to leave you with a clear summary of the plans that we've outlined today. We intend to focus on our competitively advantaged trade businesses, and we'll be seeking to realize value from this focus over time. At the same time, we will simplify the group, enabling a reduction in cost and better control of overheads. We intend to sharpen our allocation of capital with a focused portfolio, enabling stronger free cash flow generation and also enhanced returns to our shareholders. And we'll provide regular updates on progress through the normal reporting cycle, which we follow. So with that, John, Tony and I are now pleased to take any questions you have before we break for lunch. Thanks. So you're bringing microphone down. Thank you, Marianne. So let's go. Yes, Howard? Howard Seymour from Bemis. Numis. A question I want to ask, it's quite a general question, but I think sort of it's quite a few of these things. You alluded before to the growth on the markets and the various different aspects to it. But there's also been quite a lot of capacity increase in various areas, obviously, the specialists some of the specialist areas, the fixed price and even general merchanting. And as you look at this and you alluded before to price investment, etcetera, and in TP, for example, more capability at branch level. The concern is that it's going to be at the expense of price and therefore potential gross margin in some or quite a few of these areas. So just really a general question on that. So it's under the capacity versus the capability to grow the market share, price pricing or any other aspect. Yes. So it's always awkward to talk straight away about pricing and the center versus local. I guess I have a little bit more faith in the branch managers given more jurisdiction and guidance and empowerment to pitch the pricing locally, Howard, and come back to a good return. They tend to understand the cost of their vehicles and their branch costs. So we are seeing this we are not actually seeing this as a price investment. This is around winning more work or more sales and right pricing customers and increasing that share of wallet that we were talking around. Rather than just dropping prices, it will be done by customer in each local catchment. Thanks, John. And specifically on TP, because you alluded to the branch management. What specifically are you changing anything specifically at branch management level in terms of incentivization, etcetera? So we're really open to the incentivization. As I came through the branch network many years ago, we had sector leading incentive schemes. I think we've got really good schemes, and we're in dialogue with managers to identify what's going to really make things work. We've gone through a quarterly bonus scheme, which they really are in favor of. So we're not starting with 0, Howard. I think this is more evolution rather than revolution. Thanks. So just a few questions from my side. On the sort of timing regarding, I mean, obviously, you put P and H explicitly up for sale and I think you called out that obviously you need the right value. I mean, obviously, sitting where from where we're sitting at this point with the referendum, it doesn't seem a particularly good time to sell the UK assets. So I want to understand, I mean, what happens if the bid is too low? Do you just end up keeping it? And I guess, as we go further down the line, what's the kind of time frame for the turnaround in weeks before you kind of pull the trigger on doing something there? And then on maybe two questions for Alan on the sort of comments on IT and CapEx. Can you just summarize for us what is the IT bill today? And where does it sit? I guess, there's some in OpEx and there's some in CapEx. Maybe you could just summarize where we are and as you kind of fast forward a few years, once the simplification is done, we end up? And similar, if you could just help us and I guess that's a difficult question given the sort of moving of the portfolio, but in terms of the all in CapEx, maybe excluding the property because as you suggested, self funding, what's the number we should be thinking about for the next couple of years? Thanks. So I think it's really important to point put across that we've signaled an intent to just divest of Plumbing and Heating, but I've said now, I know 4 or 5 times, not at any price. So we hope to work towards the right outcome. But if we can't get the right outcome, it's outstripping its market and growing its earnings. So it's not the end of the world for us. And clearly, with Wolsey's U. K. Numbers today, we continue to make ground in that sector. So I think we've been quite pragmatic about it and clearly we'll keep people up to date as things evolve. The Wickes timescale, I'm always been impatient and Simon's up in the back row. We some of this has been self inflicted. Some of it's been real market, and we can't actually do much around the sort of the turbulence that the market's created other than be really focused on our customer and service. And we're working hard through 'nineteen to show some progress. So, Graham, on IT, we spend in terms of operating cost today within the group, the cost is a little over 1% of sales for IT at a central level. And then that's excluding the tool station business, which we described separately. As I said on the chart, we've estimated CHF 40,000,000 to CHF 50,000,000 over the next 3 years, to enact the, plan program we have around IT for the plan program we have around IT for the merchanting businesses and also the separation on the Wickes estate. At this stage, it's quite difficult to give an exact split between CapEx and what will flow through the P and L because of the specific nature of cloud based accounting. And given that we're I know you're anxious to get guidance for models, but given that this is a long term forward looking thing, and I don't have that granularity today, I'm not going to provide it. But we will cover that as we go through the normal reporting cycle. In terms of modeling for the time being for the CapEx bill, I think we indicated that CapEx had stepped down in 2018. I'm still comfortable with that guidance that we've given around the range of €140,000,000 to €160,000,000 If we add up the numbers across the page, think it's going to be a little lower than that again on a go forwards basis. And clearly, it will step down by £10,000,000 or so if you extract Plumbing and Heating from the perimeter of the group. Emily Biddulph from JPMorgan. I've got two questions, please. Just the first one on the cost savings of £20,000,000 to £30,000,000 Firstly, was I right in understanding that some of that was dependent upon the disposal of P and H? And then just sort of secondly, if that's the case, sort of how much? And then sort of thirdly, the €20,000,000 to €30,000,000 and the timing of it, what sort of what will drive that? Or sort of how should we think about it? And then secondly, just on the price investment again. I think you said that you thought it would be neutral in EBITA level. Is that simply your just your ambitions for this extend to sort of the volume increase just offsetting the price decline? You don't have any sort of more sort of ambitious kind of targets for it? Okay. Alan, do you want to pick up on the savings? And I'll try to deal with the pricing first while you're getting that together. Emily, I think we price is for me an art, not a science. Our aim will be to balance the book of investing to grow the business. Sometimes it doesn't work perfectly. We made those investments in Carcassonne at the end of 'seventeen, and it didn't really come through until sort of March, April time in 2018, it might have been 2016 or 2017, but it didn't happen in year. So I do think we've got experiment and trial, but I'm more really around targeting our customers locally. And if each of our branches branch managers picks on those best builders in and talks to them and prices them locally, I have faith in them to actually get back to a balanced scorecard. So just adding a bit, if I can, John, on the pricing as well. The statement about it being neutral to an EBITA level is to say that on the experiments that we've done so far in isolation, we've managed to do that on the individual categories. When you put that together, if you're pricing correctly in a local market and on a more consistent basis for your customers, you would expect to see operating profit growth through the volume growth that's coming through. That takes a bit of time to come through, but certainly on some of the categories where we've done that, if I take coking as an example, where we've had investments over the last 15 months, we started to see good volume growth come through after initial dip on that as the market's got to understand the pricing that you've got. Turning to the cost savings, the £20,000,000 to £30,000,000 Just to reiterate, this comes on top of what we've already done in the General Merchant this year, where we identified £10,000,000 of savings for the second half of twenty eighteen, so annualizing at £20,000,000 and around £18,000,000 annualized within the Wickes business. As you know, we took some of those cost actions late 2017, and then during May 2018, we took another go at the overhead in the Wickes support center at that stage and through the network. So we're building on top of close to €40,000,000 of cost reductions already. Where will the rest come from? It is focused on the above branch activity. So for me, within IT, as we do the IT program, within our supply chain and also in the support structures, which sit above the branches and the stores within the network. A small proportion of that will be unlocked by having a simpler group in terms of the number of businesses that we manage. So we'll come with the P and H business. The guidance we're giving at this stage is over the next 18 months. So clearly, there's a large number of moving parts. I had a question before we started. How would I would I describe this as low hanging fruit, an expression I don't really like, to be honest, because that suggests you've been sat on your hands. It's not straightforward, but we've got a clear plan as to how we will go about that using some zero based budgeting techniques. Go on, Aynsley. Thanks very much. And two questions, please. What related to the pricing, but just thinking of a specific number, if I think of general merchant business and the contracts, given what you've said today, with a kind of 9% margin for general merchant and maybe 6.5%, 7% be a reasonable kind of medium term view of where those businesses get to? And then secondly, historically, it's always been a feature that more buying power is a positive January structurally for the industry. And you're pointing today to probably selling around good third of the business if you sell wicks and plumbing heating. If you sold that tomorrow, are you saying that there's no kind of significant material impact on your buying power and your working capital terms with suppliers? Okay. Look, I think the most difficult area of Green and Gold is the fact that the expectations for its net to sales. I think we should be talking about growing that business and growing its absolute earnings and its absolute returns on capital and not be so hung up on a return on sales basis. Now that's not code that we're going to drop the return on sales, but I'd much rather be talking about getting this business back to outperforming its sector, growing its absolute earnings and net profit and growing its absolute return on capital. And as Alan sort of helped me out, we're not giving guidance today, Aynsley. But for me, a healthy green and gold is growing, growing its earnings and growing its returns. On the synergies, you're right into competitive sort of advantages and giving away sort of market information. We I think we'll be smart or we'll aim to be smart. We've obviously looked at the whole area of dis synergies. And if anything really comes to it, we can join a buying group, can't we? But no, we'll give detail as we move forward. But clearly, we wouldn't if we didn't really feel we could overcome some of that, then we wouldn't be sort of entering that. I think we've done extensive analysis, as you can imagine, over the last 12 to 15 months before announcing what we've laid out to date. And the buying synergies, when I joined the group, I assumed they would be material. They are not as material as I would have thought. And they have been dissipated, I think, over time by the existence of buying groups within the industry and also by the ways in which the industry structure works. So a supply base that operates with complex and extensive rebate arrangements, which end up obfuscating the what I call a net net price. So don't assume that there is a that all of the synergies from operating a large group like the Travis Perkins Group come from buying. There are other subtle things like spreading that necessary IT investment over a large revenue base where you can drive synergy compared to a regional merchant, for example, within the industry? Or attracting really high class apprenticeships into the business that serve our customers better. Right. So I've got the Clive, go on. And then Carol. Clive Glan. Clive Glan. Four cylinders. Well, I'm not going to mention dropping 2 cylinders. Let's just hope it's a highly tuned motorbike with 2 cylinders rather than a Citroen 2CV, should we? Could be moving from a V8 to a V6. Well, you'd need 8 cylinders for that. But I mean, I've got 3 questions if I may. The easiest one is speed of investment in Toolstation Europe. If you can just give us I mean, you've obviously sort of sketched out. You're in 4 markets now geographically rather than just the Netherlands. And just in terms of that sort of speed at which you think you can build a business there. The second one was and I know you've been around long enough to remember some of these numbers. But if we go back to the '90s early '00s in terms of the overhead to sales ratio, Where was it back then compared to the 24 and a bit that you're at now? And structurally, do you think I'm assuming it's lower, but maybe I'm wrong. But do you think you could ever get back to those sorts of numbers? And the last one I had was on sort of Slide 8, the I suppose the sort of column charts you put up in terms of the end markets. You very kindly obviously given the 2017 numbers. What I'd love to know is where you think it's going to be in 2022, 2023? Because ultimately, if a big chunk of that sort of direct and sort of fixed price stuff is going to be 8%, 10%, 12%, 15% of the market, then do you need to be developing a Selco type model to sit next to green and gold as well? Okay. Tony, do you want to participate and give the tool? Should I go on to all session Europe? Yes. Should I start there? So the first thing to say is we need to make sure the propositions are right first, Clive. We don't want to get ahead of ourselves. So that's why we've been really judicious in the last 3 or 4 years, making sure the proposition is spot on. So that's the sort of foundation of what we've been doing. The proposition improvements we're making in the U. K. Will roll into Europe over time in terms of front of shop product, range extension online and so on. But we've been quite cautious, I think, in the last couple of years to make sure we've got the proposition working and working well. In terms of if I take a couple of the markets and you can sort of add these together, but we've put a new 150,000 square foot distribution center down in Holland that will serve Dutch online pick and pack as well as Germany and Belgium online. And it will do all of our shop replenishment in Holland and Belgium up to probably around 150 branches. So that's already in our business. The shop fit out is no different to the U. K. So it's around £150,000 slightly more in euros but not much more these days. And the unit economics are again very similar. So the leases are slightly shorter. The lease costs are slightly lower, but the wages are slightly higher. So the economics look very similar. You can work out 25 shops next year in Holland and 5 in Belgium, 30. You can see the sort of capital spend we'll be putting in, in a shop on the shop basis. Much of the IT work, as I said, is done in the U. K. So that's where we get some operating leverage. So you should expect that for the next 2, 3, 4 years, I think, in Holland, maybe accelerating a bit the shop rollout in 2020, 2021. And your shop fit out, Tony, includes the stock, doesn't it? No, the shop fit out is just the shop fit out. And then there's 150? Yes. And then there's stock on top. But that's working capital consumption, but the stock turns are reasonable. In France, I think we're going to take a little bit longer just to work out exactly how we accelerate. And we'll talk to you about more of that as we go through 2019 2020. But you should be thinking about Holland as being the start point really. Okay. Thank you, Tony. On the overhead to sales, Clyde, rather than guess, I think directionally, you're right. We were in a bit of a more simple world. And I think direction of travel isn't a bad sort of indicator where we need to go. I think some of the work we've invested in is working really well. But we've as Alan said, we're taking a sort of 0 based approach to the business and aiming to actually simplify the business couple of 200 basis points lower than we are now. Property is more expensive in fairness as well. Direction of travel. Our esteemed colleague, Chris Bosworth, who did the Page 8, did also give you a direction of travel. You didn't expect us to give you the exact numbers, did you? No. So I think we're well positioned with obviously expectations that we'll see continued growth of the fixed price. We'll see continued growth of the general merchant team. We'll see continued growth and trajectory of the specialist merchant. And we're well placed in those markets. Okay. Next one. Yes, Karel, please. Hi. It's Prahal from Deutsche Bank. I've got three questions. So the first one is on general merchanting. Just wanted to work out West Spinnaker, how relevant it is in terms of this whole local empowerment thing. Are branch managers forced to use this when it comes to pricing at a branch level? Or is it simply used as a guide? The second question is after all this cost cutting is through, again, in general merchanting, given the price perception is one of the major issues and you want to outperform the markets, could you look at being more price competitive a lot more aggressively a couple of years down the line? And the final question just relates to that chart on share of wallet at TP for TP customers. I noticed that fixed price retailers are only about 10%. But is that growing quite significantly as a share of that wallet? Are you should be paying quite a lot of attention to it? Yes. So good questions. I mean, we think Spinnaker has got lots of value going forward. And if you talk to any of our branch managers, they're very much in favor. What they're looking for is good price guidance. And then they to start a conversation with a customer. And I think we can refine that as we go forward rather than any discussion about abandoning it. So I think it's about how we use it and giving managers that sort of confidence that they can talk to their customers and negotiate there and then. The price advantage, I think, when I look at Merchanting versus Consumer, when you actually just take prices down, as we saw with Bunnings, it just drives profit right out of the sector. And I think the advantage you've got with the trade merchants, the customers do quite like having their own prices. They're not looking just for the fixed price that everyone else is getting all the time. They're looking to have a little bit of an advantage. And I think you can if you set it up by catchment, by customer. You don't have to have a situation where a lot of profit is driven out of the sector if you're smart because it is opaque customer by customer, catchment by catchment rather than just drop prices on categories, which often then gets a reaction from a competitor. Tony, did you want to pick up the sort of fixed price merchant? Because obviously, we participate in that. Yes. So obviously, it's an expanding channel. Customers small customers, importantly, are moving that direction, and we're very attuned to that. I would say it's at the moment, ex Salco and Builder Depot in London, it's focused on light side materials. So I try and describe it in our business. I think in general, merchanting is about onethree of our business in terms of product range is affected. And then it's about onethree of our customers. So it's about onenine of our business and we've been broadly consistent with that because it is really pertinent for our small customers, not our medium and larger customers. So it is important to us. We have right priced a number of the ranges in TP over the last 12 or 18 months, particularly in categories like power tools and hand tools, and that's been to good effect. So there are things we can do to counter it. Our trade offers now account for nearly GBP 100,000,000 worth of sales in TP on fixed prices. So non discountable lines, trade offers, right pricing categories is a defense to that. And those categories, as I said, are performing well. So we're attuned to it. We obviously have a BILT trial. We were discussing that earlier this week in our built proposition in Birmingham. We've seen very good net promoter scores from our customers around 80%. We've got some engineering to do on the model, but we will probably open a second branch in that space in 2019. So we've got some defenses, we think, particularly in metropolitan areas and cities. And so we've got a number of levers to pull, I think. Excellent. I promised Stephen and Amy I'll come back to you next. Thanks. Stephen Rawlinson from Applied Value. In spirit with the meeting, I won't tell you how many questions I've got, but I'll give you an exact number later. Just on the really the in and around the issue of the disposals. Just can you just help me read down the time scale of these things? Businesses deteriorate over such times when you're selling stuff and it distracts from the core business and you've got a lot to do there. So could you just help us out whether you're up to with communications with suppliers, customers and potential buyers on that one? Secondly, whether it will be regarded as discontinued given the statements that you've made? And thirdly, given the sort of turnover, you're talking about a very large chunk of money that might be coming your way. Can you talk to us about the use of those proceeds if that's been thought through by the board or discussed already? Can you give us some idea on that? Tani, do you want to pick up on the timetable? And Alan, you obviously So in terms of the timetable, I think we've been doing a lot of separation work over the last 18 months. So we're in pretty good order in most parts of the business. We've still got some work to do on IT. Of course, Alain will run the sale process. That's important. But we would like to get the business sold in 2019. It's our intention to sell it, but we won't sell it at any price. It's important that we realize value for shareholders. And we've made very good progress in the last 18 months. And we will look at it on a value basis. We'll look at the discounted cash flows. We'll look at the value from a buyer and we'll decide how to proceed. But we are cognizant of those issues in terms of keeping the team motivated and keeping the business on track and avoiding distractions. So hopefully, that gives you a sense of it. So I think the accounting standard is pretty clear when it comes to what you can recognize as discontinued operations. Having announced today that we're intending to explore a disposal doesn't meet that accounting standard. So through the 2018 financial year, it's still a fully integrated part of the business. We will not meet the threshold of the accounting standard in my view until we're much further down the line on a sale process. In terms of use of proceeds, I think the flippant answer is to tackle that when we get there. However, to give you a bit more of an indication, we've said we think we're comfortable running this business with a leverage target on a lease adjusted debt to EBITDA AR basis of 2.5 times. Clearly, if you bring in a significant amount of proceeds, you're well below that. So I think that gives an indication as to how we'd be thinking about things. Amy, Ami Galla from Citi. Please first on the ERP implementation, could you give us more detailed time lines by business of what the revised time lines are on deployment? My second one, just a follow-up on the leverage comment. Could you give us some color around what the lease adjusted leverage stands for the business excluding Plumbing, Heating and the Wickes business? And should we then judge the core business versus the 2.5x medium term target that you said? Okay. So on the ERP implementation, we've not finalized all of the business unit go lives at this stage. We have intended to go live with the BSS business at the end of Q1 2019. We're currently looking at pushing that back to the autumn of 2019, still to be fully determined. One of the key reasons for that is the Plumbing and Heating business today is fully integrated within those legacy IT systems. So to Tony's previous point to Steve's question, unpicking that is quite complex, and we need to focus on that at this stage as well as focusing on the opportunity that, that affords us to unpick some of the legacy that we have around operating our own data centers and the other 400 plus applications that we run. From a leverage point of view, in terms of the lease adjusted debt, the lease debt in Plumbing and Heating is not huge. If you think about the nature of that business, they're fairly small units, so it's not material, and they're on industrial locations as well. When it comes to the Wickes business, quite clearly, larger units, in more expensive sites, well, there you do get to a much higher amount of lease debt within the group balance sheet. Okay. So we're going to work out that side. I'll come get that side worked out and then we'll come back. We might get done by 4. Simon Irwin at Credit Suisse. Just a couple of questions on the consumer side. You talked about Toolstation having a 10% to 20% price advantage versus its its nearest competitors. Can you give us a bit more color on that? Who are the you think the nearest competitors? Is this across branded and own brand product? And just give us a flavor around that. And secondly, given the kind of focus on price generally, do you think it's sustainable for Wickes to operate on what is effectively an E deal sorry, a kind of high low promotional price? Or do you think you're going to have to move much further towards EDLP over time anyway? Why don't you take the tools there? I mean, you can have a view on So we describe it as a 10% to 20% price advantage value advantage. That's a combination of things. That's from the mix of own brand product, but actually from genuinely better prices on comparable products as well. And that 10% to 20% is across a basket of competitors, which includes some of the fixed price operators, some of the DIY operators and clearly our nearest competitor, which I don't think I need to tell you who that is. So that's what we look at. We look at a basket of goods. We use a number of applications to scrape websites. So we look at 2,000 or 3000 products on a daily basis to ensure we are maintaining our price leadership. Our customers are telling us that's the case as well. So that's how we look at pricing. Hi, Lo, do you want to No, you can have a go. Sorry. No, no, go on. Just in Wix. And Wix is a seasonally and promotionally intense business. As John mentioned, I think we stepped off some of that promotional intensity in 2017. We're more recently stepping back on some of that promotional intensity to good effect. I think there are 2 principal groups of customers in Wickes. There are DIY and do it for me customers, and we can drive footfall through promotions in seasonal events and particularly in kitchen and bathroom sales. Our trade customers, which account for about onethree of the business, do like a more consistent everyday low price, particularly when they're buying bulk products. And we do offer that on the trade side of the business. So that's I think it's a combination of things in Wickes. And just, yes, a personal view on kitchens. On average, we're buying a kitchen sort of 8 to 9 years. The vast majority of Wickes Kitchens are sold to the consumer. Everyday low pricing doesn't really work in that area, just given that they don't know what the price is between 9 years or 8 or 9 years. So I think the team are always compelled to try and find mechanics that customers find attractive. Okay. And we're going to get some more questions. Paul? It's Paul Checketts from Barclays. I've got three questions as well, please. On Travis Perkins, the green and gold, if I look at the last 3 years, then your sales growth averaged about 4%. And if I look at the independents, basket of independents over that same period, depending how you slice and dice that, Growth has been more like 9% to 11% on average. Could you I'm maybe asking you to distill what you've presented, but can you give us a sense of why you think it is that they have taken share? And what it is you're doing now that will address that? That's the first one. 2nd is on working capital. When you look at the capital employed, that line has continued to increase, and part of that is to increase, and part of that is has been related to investment in the supply chain and distribution centers, etcetera. But I was told part of that argument was this. There was investment upfront, and we'd be double carrying inventory in branches and distribution centers. So now that we're moving into a different phase, why wouldn't working capital to sales start to come down instead of staying flat? And then the last one is on Toolstation. Tony, could you update us on how you view the addressable market in the U. K. Now? In the past, you've talked about things are changing quite a lot. So if I take the first one on, Alan, if you pick up on the capital employed piece, if you would, and Tony pick up the tool station. If you do take the last 5 years, Paul, and you take the first half of that, the green and gold comfortably had between 3% 4% outperformance in that period, and it did swap around in the last period. And you are taking the very best to cut and size your numbers. The average isn't 4 points higher, but you can actually get a cluster of Hughes Grays and MKMs that have got that cluster. My absolute belief is that we need to get behind the branch manager in each catchment, keep it simple. We see it where we got the right branch manager in the right branch, supported adequately with a great regional director, we can still win. So I think this is more around taking the fight back to the independents in each catchment. Did you want to pick up on the capital employed, Alan? Yes. So Paul, I don't think we have grown the overall working capital as a percentage of sales in green and gold or the inventory piece at least. I think as we put the range centers in, we have seen a reduction in stock in some of the branches. I think we should actually rebalance some of that, to be honest. I think we have some branches who are not carrying enough stop depth at the moment, and that's been noted by customers. So we will be redressing some of the balance. I think where we have grown working capital over the last few years has been mainly through the debtor book, which is more in line with credit sales and then also in expanding businesses like Toolstation. That's where we've really put the inventory down. And Toolstation, I think there's probably 3 dimensions to look at the addressable market, Paul. The first one is in the 12,000 consumable products we sell. So that's the first way to think about the business. The second one is to think more about the range extension. Some of our competitors have about 15,000 to 20,000 products extended online. We're moving in that direction. And we've now got the infrastructure to do that. And that's to sell things like showers, bathroom sanitary ware, doors, kitchens, sheds, all sorts of things. The distribution infrastructure in the U. K. Is building. Manufacturers now have drop ship capability. We've just switched that on with 1 of our designer radiator suppliers in Toolstation. We wouldn't stop designer radiators, but we've made very good inroads very quickly into that market by turning on that ship capability direct from manufacturer manufacturing plant direct to customer. And then the third way to think about the addressable market, I think, is through catchments and our penetration of catchments. We've talked consistently about 1 branch per 50,000, 45,000 of population in the Bristol catchment, one of the highest penetrated catchments. So that would give you an indication of probably 1400, 1500 of these types of outlets in the U. K. There are currently just under 1,000 with ourselves and Screwfix combined. But that's changing. It's evolving. We are going into smaller catchments, some that I know pretty well. So Ross on Wye, if you know Ross on Wye, Mould in North Wales, Midsummer Norton, these are small catchments, probably of 12,000 to 15,000 people. And we're being surprised. We're surprising ourselves, I think, in terms of the sales we're extracting from those smaller catchments. So it does tell us there's much more latent demand. So if you look at those economics, you then say there's probably more than 1500 in the U. So that's the way we're thinking about it. But it's an evolving feast as customers move in that direction. Brilliant. Paul? John, I've got you, but I promise that can we get Robert and then Charlie? Morning, everyone. Robert Eason from Goodbody. If I can just bring you to kind of Slide 19 in terms of how you position the businesses and also just given just recent commentary there. I was just a bit surprised how you positioned the green and gold not extending into the kind of smaller builder market in terms of schematic. And if I just couple that sorry, Slide 19. And if I just couple that with just the comments there by Tony in terms of you're bringing Toolstation into smaller catchment areas a bit more. Is there not a risk here that what you're doing is you're going to continue to impact that smaller builder going to Travis Perkins, the Green and Gold, where the independents have probably taken share fixed pricing model. So how are we just to see this kind of how that green gold is going to operate in that smaller market? Or is Toolstation going to be your complete solution to that? Because I would have just thought Travis Perkins was a bit more into this model. Could we just be schematic? I'm reading too much into it. So just general commentary around that. And if I just kind of we're external observers of a very detailed business. We see things at a very high level. And obviously, a lot of complex things are going on behind the scenes. How should we judge your performance as we go through 2019 and into 2020 with the helicopter view that we have of such businesses? Is it kind of excuse me for putting it this way, kind of more 2020 that we'll see the improvement as all this reorganization reshaping just getting the branch managers more in control of their own destiny, their pricing with their customer, etcetera. Is that the way we should feel given kind of the helicopter view that we have on such businesses? So do you want to talk about your graph? Yes. Robert, I may have confused people by putting small at the top of the page and large at the bottom of the page. So apologies if I have. It's intended to cover the small customers. Can we put Slide well, can you see Slide 19 in front of you? So it does cover the small customer, frankly. We've left it out of the large customer. It does serve large some large customers. But clearly, it's given our convenient network, it's principally a small and medium sized local and regional builder proposition. And on judging, you hopefully, you wouldn't expect us to overpromise and underdeliver. So I think 'nineteen is going to be a tough year to call. We're standing here in December, still not really knowing what the 29th March is offering. But like always, Robert, you'd like to be able to see some evidence that the direction of travel is good. So 'nineteen will be there's going to a lot go on in 'nineteen, but we start it with a good ambition to do as well as we can. So can I take the question around Toolstation and smaller catchments as well? So I think there's a couple of things to say, Robert. The first one is, we are we think we're taking share from a number of sources. One is the larger DIY sheds. The second one is making sure we're very competitive online. And the third one is, we are, of course, we've been taking some elements of share from the merchants, but it's isolated to those light side plumbing and heating electrical categories. So there is some overlap with TP, but it's relatively limited. It does impinge on specialist merchants as much as it would a general merchant business. But again, it's for those smaller customers, not the slightly larger builders in local catchments and regional builders. So I think we think Green and Gold is highly defensible. It's interesting when you John mentioned it earlier, when you think about pricing, fixed pricing is one thing. But actually, the strength in the TP proposition, we might argue sometimes it's a weakness, but it's also a strength in terms of our ability to price to meet a customer's expectation of volume and their demand. And I do say about the fixed price merchants, it's a bit like tendering with open book pricing. They are tendering with open book pricing. Our large our merchant businesses can see the pricing, and therefore, they can appropriately price larger jobs and larger contracts. So I think there's an inherent strength in that ability to price and to meet local demand. And not aiming to confuse things, Robert. I think there's a different Sorry, Kevin, I've got you coming up. I know you're going to give us a stinker of a question. Can I have Charlie and then we've got John and then I'm going to come to Kevin because I'm going to avoid you for as long as I can? No. No. I wouldn't do that, Kevin. It's Charlie Campbell of Liberum. I've got 2 really. First is on digital. You've talked a lot about digital in the retail channels, so clearly that's been very successful for you. But on trade, you've said that I think has some untapped opportunities and talked about doing that in the medium term. And is what's holding you back really the IT and wanting to get all that in place before launching that? Or do you think genuinely that trade customers are not as interested in digital channels as they are on the retail side? And then secondly, a question on general merchanting, follows up from Robert's question really. But is there a risk that these best builders in the areas that you've talked about are perhaps kind of more price sensitive than others and therefore, you will have to give up a bit of gross to attract them? Or should we think that actually the cost to serve is a bit lower, so it doesn't matter and net net they're as profitable as other customers? Okay. My experience with Best Builder in town, that they know what value is, but they tend to be also the highest quality. They don't actually normally advertise. They normally win work locally on word-of-mouth and reputation. And that comes with having a supplier that they can trust and rely upon, Charlie. So if they're both. I think they're value in service, but clearly, they want to buy well as well, and we would expect that. So a lot of this, given that 50% of share of wallet that we don't have now, we can look at that as incremental. The digital, I've got a view, but Alan and Tony may have a similar or slightly different. When we talk consumer, I think we're talking about web trading essentially And where we are getting more sophisticated in some of that digital journey, it's mainly the trading on a website. The trade, and in particular, Frank, Elkins has led it through our contracts, it's about precision and being able to track orders and the whole what goes on today manually, they want access to so they've got delivery slots, they can actually see what time slots. And so I see that more about enhancing the customer experience electronically or digitally as we see it to make us more attractive in terms of to do business with. And none of the trade businesses, and I'd cite we'd all have our best in class. Mine, I always love it if I buy online, and DPD delivers for me because they've got the best transparency, the best the most flexible system to be able to sort of manage the delivery. And I think Frank's got that vision that why wouldn't a trade business and a tradesman want that sort of visibility. Yes. To add maybe a couple of things, John. With our larger customers, digital integration is important. So as John mentioned, product and delivery tracking is important. The second area where we've both in the contracts and P and H businesses have been moving is in automated order entry input. So we do not want our customers ringing us with a list of 1,000 products for plots and sites tomorrow. So we are increasingly linking into their systems, getting forward orders 4 weeks or 6 weeks in advance. They flow the order through us to us digitally, then we can re implement the stock and we can make sure the stock is allocated and delivered on time. So in our larger businesses, that digital integration is really important. From an e commerce perspective, which is where John mentions with smaller customers, clearly, e commerce is important for smaller customers as we're seeing. We are growing our digital presence in Travis Perkins, similarly in our P and H businesses from a trade perspective. Price comparison is too important to a point. But I think the 3rd area, which is really important is our tradesmen want trade specialisms. So and we've seen this again in the plumbing and heating business. Where they've got distressed purchase or convenience purchase, things like boiler spares, they will go online, they will order product and it's easily shippable, so we can get it to them within 24 hours, 6 days or increasingly 7 days a week. So that's important to them. And also where there's a degree of technical expertise required. So in our underfloor heating business, we provide our trade customers with a 3 d CAD design service and a quotation service. And again, that's important for them, because they don't often they may not be installing underfloor heating products all the time. And therefore, giving you a degree of technical expertise both on and offline is really important. So the market is evolving clearly, but I think those are the 2 dimensions to think about it, digital integration for larger customers and e commerce for smaller customers. Brilliant. If we go to Kevin now, if you can, and then John, I will come back and no, no. No one hungry? Okay. All right, Kevin. Don't let me down. You ready, Alan? I've eaten all the sweets. I totally understand the philosophy of basically going back to trade. So trade wins, retail doesn't. What I don't well, one thing before I get on to the main question. You haven't talked about the tile business or benchmarks. It might be worth a comment to say where they fit in this new strategy. But in a way, the thing I don't quite Ross, maybe I understand is, why have you chosen to defer a disposal of Wickes whereas you appear to have opted to go down Plumbing and Heating in the short term? And if it's because basically there's simply no exit at the moment because of the landscape in that sector, Aren't you in a position where you are going to have to invest money in that business in the medium term to keep it active, relevant and all the rest of it because you've pretty much cut the overhead to the bone. I can't imagine that you will not need to invest something in there if it's going to have to have a stand alone IT system and compete with the competitors in a sense, whatever they do, you've got to respond to that. And I guess the other thing is, is there a little matter of I can't remember the exact number, but round figures are best part of the £1,000,000,000 of goodwill on the balance sheet at some point presumably needs to be addressed as well with that business. Can I start? And then I'm more than happy for Alan and Tony to have a say. We chose not to cover Tile Giant and Benchmark only because it's a little bit of an example of focus. We could sort of add another number of other businesses. We absolutely believe or I absolutely believe in benchmarking its way forward, just for the record. But we try to keep things tight and focus on our bigger businesses. It was mentioned a couple of times, but not in great detail. Tile Giant, in fairness, is a £50,000,000 business and benchmark 3 times bigger than that. But that's still relatively small compared to the other businesses we focused on. Great question, as usual, Kevin, in terms of why not Wix, why P and H. And I think there is a combination overriding that we're chasing shareholder value. And at the moment, there's a lot of uncertainty around DIY. And we've come off the great trajectory that Simon and the team had us moving on because of some of the external factors that we saw on the back of Homebase and Bunnings. We will be very thoughtful about investment versus return with Wickes. We're talking around creating optionality and nothing definite. And P and H, on the other hand, is a good point of a cycle. And it's the drive for simplicity that we talked around. No, I didn't say that. I said we would consider the best way forward to give us shareholder value. And if that is investing to get returns, then we'll consider that. But equally, I'm not committing either way. Alan? John, I think that addresses the point around goodwill for me as well, which is that there's no hurry here as concerns Wickes. We think within its sector, it's the best placed of the DIY sheds to win in the long term. What we're saying is it's clear if we're on a trade focused purpose, the fit of Wickes is less strong than other businesses, no more, no less. I think we have got foundations we can build on. The business has come a long way in the last 5 years. We stubbed our toe in the last 12, 15 months. But the team have got a plan to address that. So the key thing is we will be determining our thought process by long term shareholder value and what we judge is right. We've got a good idea of value of all of our businesses and how we can generate value from them in the long term. Okay. All right. John? Thanks. Sorry, I've got 4. You wouldn't expect any less, I don't think. No. We guessed 5 actually, but we were wrong. Just on coming back to the point about what you're doing in general merchanting, clearly, you've mentioned it several times, but this relies on the branch manager. From January 1, what is changing for that branch manager in terms of either his visibility on a price? So Spinnaker kind of as mentioned earlier, is that the pricing data he's going to have? Is he going to have a rebate adjusted number? Just so he understands how he can behave in the market is one thing. Secondly, how many of those branch managers have turned over where you've kind of lost those guys because they've got paid off with the kind of straightjacket that's been there over the last 5 years? Is there a sizable number where you'll have to bring in more of those owner driver mentality kind of people? And will that guy have more control over credit? So if he has the best builder in his locality who's never done business, can he immediately give credit? Or how will all of those things kind of work? So just to understand how much of a freedom he's going to be given relative to what he's had in the past. And I know you mentioned it earlier, but will he be getting a better incentive scheme in that it was talked about 5 years ago. Has anything got better to drive what a branch manager can earn in Travis? Because it would look like the employer of choice is Howden's these days just to understand why someone would want to come and work at Travis and do that kind of role? Second one was just Tilbury. It was mentioned as extracting capital. Can you just explain? I think you sold it and did you sell a leaseback? So are you being compensated by the new landlord in terms of that? Just to understand exactly what's going on there. So we haven't sold it, John. The 3rd one so you're right. Just to understand these are an insurance claim then in terms of extracting capital, just to understand what was going on? The third one was just on the group's balance sheet. You've obviously got too much of bond debt. Is there an opportunity does it make sense to reduce that by buying those in? Is that too expensive? Or do we just sit with the bond financing for the next few years? And then finally, Toolstation was mentioned at obviously U. K. And Europe. Can we understand the European CapEx? Is that in an associate? Is that about to come on balance sheet? When do you buy Toolstation? And at what cost or broadly either the formula or to understand what that would be as a cash capital consumption factor in terms of what you do? So Tilbury, John, is owned. And as I said earlier through the presentation, is subject to a legal claim. And I don't really want to get into that today openly, other than it is our site, and we have stock on it that we can obviously utilize and recycle. So we've been forced off Tilbury because of the subsidence and operating the forklift trucks. But don't be it is an owned site, okay? And it does not affect our Warrington and Cardiff operations. GM, on the 1st January, give Kieran a bit of a time, you don't move in until the 2nd January. But there is a clear wind of change. We've been doing some really good work with the managers and led by some of the senior operators. And where I won't make you promise that we're going to just be giving credit willy nilly, we have systems that help us get good credit where we think it's a good opportunity to increase sales. Our credit has really run very well and arguably a bit too tight. It operates somewhere. Alan and I disagree with this, but it operates around 0.3% or 0.4% of credit sales. So we have latitude, but we are we won't be doing it on gut feel. We will be doing it with good intelligence. The incentive scheme, as I say, I sat through a number of meetings. We are absolutely open to come up with incentive schemes that our managers find attractive and generate the right behaviors. And we've got no restrictions there in terms of what we can do and what we won't do. We want to come up with something that works for both the group and the branch manager. But you will see a progressive approach where that scale are used that we will move to more to local empowerment within good frameworks and good governance, but good frameworks that enable them to run their business in a more effective way. The pricing point, just to understand, so branch manager, if you think just to pick up new business and grow that top line, can he go and do work business below the Spinnaker price with a divisional guide turning on? So the good thing is I'm employing more female branch managers now as well, but they will have latitude to win work and generate growth for the business and growth in earnings. All right. Alan, go on. You've got the easy ones. Yes. Well, I just wanted to say one thing on branch manager incentives, if I may. A well designed incentive scheme is entirely self financing. So it should benefit the branch manager personally as well as benefiting the group. So as we design it, that's the key design feature for me. If I could wave a magic wand, as you know, John, we would have less bond debt than we have today. We have looked at options around the bonds. It is very expensive to buy them out at this stage, but we keep that under constant review. From a Toolstation Europe accounting point of view, it is still accounted for as an associate, and that will continue in the near future. But under a complex accounting standard, we may reach a point where we deem to have control even though we have something like 47.5% of the shares within the next 12 to 18 months, in which case we'd have to consolidate the business. So we keep that under review. There is an earn out agreement with the other shareholders. We're a couple of years off that at this stage. Okay. One more from the floor, and then we've just got to make sure that those that have been patient on the lines are looked after. All right. Phil Roseberg from Bernstein. Just one question. You'd be pleased to hear. So we've heard about an awful lot of initiatives now on top of the initiatives that have already been, I would say, launched in the last few years. So there's an awful lot of stuff going on. And I guess that's the sort of price you pay for simplicity going forward. But given all the market uncertainty, isn't this a difficult time to do all that? And so my question is really what is the risk to 2019 in terms of performance, in terms of integration costs and just the overall operation? Well, bloody big one though, isn't it? When is good timing? And we feel that some of the challenges that we're taking on here in terms of being very clear with our purpose, being focused on the trade and simplifying how we do business has got real big benefits for the longer term. We are we will be sensitive to situations. I don't think anyone here knows what will happen in March. But against that uncertainty, we are moving forward, but being thoughtful. And we think that it will be both good for the group, the businesses and our performance, as we go forward. It's unknown at the moment. But I think we'll be in a better position for doing what we're doing today in 2019 as a result of it, whatever that happens. Every forecast I've heard about Brexit has been wrong. So we've got to make decisions for the group, and we have the opportunity to get on with this. And I think we're doing it thoughtfully, not rashly, and we'll manage through 'nineteen. But I think we'll be a much better business as a result of that. Is there any questions on the no? Okay. One last question or do everyone want to go to lunch? On behalf of Stuart, Tony, Alan and myself, thank you very much for that. That was a bit of a longer session I expected but hopefully worthwhile. Thank you very, very much for coming, and we really appreciate it. Thank you.

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