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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, I would like to welcome you to the Travis Perkins 2019 Q3 Trading Update. My name is Brika, and I will be coordinating your call today. [Operator Instructions] And I would now like to hand over to Nick Roberts, the group CEO, to begin the call.
Well, good morning to you all. Thank you very much. It's a real pleasure to join Alan and you all for my first call as CEO following nearly 3 months in charge of the group. My short time with the group has been a tremendous experience, I have to say, due to the welcome afforded to me by my colleagues, by our customers and our suppliers. And clearly I've had much to learn in this short time. The highlight of my tenure so far has been spending just over 6 weeks through to the summer on the road, visiting colleagues across 60 of our branches across all of our brands up and down the country from Inverness to Somerset from across in Rotterdam over to Liverpool, all our branches, our distribution centers and our offices. As well as spending time out with our drivers, delivering loads to our customers, serving customers in branches behind our famous green screen and understanding our supply chain. It really was a fabulous insight. I've seen firsthand the progress that's being made in equipping our branch managers and their teams with the ability to make the right decisions for our customers at a local level. And whilst we've still got much to do in this regard, I'm confident that we're on the right track. This, alongside meetings with our customers and suppliers large and small, has enabled me to understand merchanting and set that in the context of my broader understanding of the construction industry that we serve. I've been really impressed by the quality and the character of our colleagues in ensuring we give our customers the best possible service, and our capability in data and technology that I believe will enable us as a business to evolve at pace for the future. So it therefore gives me really great pleasure to be sitting here with Alan, presenting what I believe are positive update on the group through the third quarter as we deliver the plan that was communicated to you all last December.I believe we have the right plan in place. I'm impressed by the progress that's been made so far against that plan. We will continue to focus on its delivery and we remain on track to deliver performance in line with expectations.In future Q1 and Q3 calls, they'll be conducted by Alan, unless anything of strategic nature or is material to the group, for which I'll join him on those calls. With that, I'll now hand over to Alan and look forward to your questions.
Thank you, Nick, and good morning, everyone. As you'll have seen from the heading on the Q3 trading update this morning, we've characterized the performance as resilient in the context of challenging market conditions. So if I run through the headlines, the total group like-for-like revenue performance in the quarter, including Plumbing & Heating, was 3.4%. On a 2-year basis, you'll note that the like-for-like was 7.7%. That's a slowdown from 9.7% in the first half, reflecting incrementally more challenging market conditions. The Merchanting businesses continued to grow their share and delivered a decent performance, 1.6% like-for-like in the quarter, with the Travis Perkins general merchant growing at over 2% in the period. In Plumbing & Heating, our like-for-like sales overall were unchanged in the quarter. The branch-based businesses demonstrated good growth and that was offset by lower sales, as we expected, in the wholesale business. The Toolstation business continued to demonstrate excellent growth, with Q3 like-for-like in the U.K. up 15.4%. And likewise, our sales performance in Retail was very strong with 9.7% like-for-like growth, albeit still against a weak comparator, as you'll see from looking at the 2-year like-for-like. Within the Wickes business, the strong performance was seen across both the core and also the Kitchen & Bathroom showroom proposition. We also continued to make really good progress on the cost reduction agenda and remain on track to deliver the GBP 20 million to GBP 30 million of cost savings, which were identified at the Capital Markets Day last year, by mid-2020. If I move to some of the corporate developments activity. Given the uncertain market conditions, we've taken the decision to pause the Plumbing & Heating disposal process for the time being as we do not believe that a sell in the current market conditions would optimize value for shareholders. We've made good progress in the quarter towards the demerger of Wickes, both in terms of the activities to make Wickes a stand-alone business and in terms of the regulatory process. We remain on track to complete the demerger in Q2 2020. I'd also like to draw your attention to the fact that we acquired majority control of Toolstation Europe at the end of September. Going forward, therefore, the business will be fully consolidated within the group's results. This acquisition will enable us to invest further in our European operations. So if I summarize, the group traded well during Q3 in the context of a challenging market. We also continued to make progress in the period on delivering the strategy laid out in December 2018. Given the current market uncertainty, we're maintaining our cautious outlook for the near term. Notwithstanding a much tougher Q4 comparator, we anticipate full year performance to remain in line with our expectations. And with that, Nick and I will be very happy to take your questions.
[Operator Instructions] The first question today from the phone lines comes from Paul Roger from BNP Paribas.
So I'll have 3 questions to start then. Firstly, if I think about 2019, the story has obviously basically been a case of self-help offsetting market weakness. My question is basically, if the markets do stay weak into next year, is there more you can do? Or are we in a situation where some profitability could come some under pressure in 2020? My second question is actually for Nick. So Nick, you sound quite aligned with the strategies from last December's Capital Markets Day. I'm just wondering if there's any areas where you might think differently, maybe on digital or IT spending of Range Centres. Or if there's any areas where you think you could potentially do a bit more? And then thirdly, on the P&H sale. Is the delay just about the market conditions? And maybe you can reassure us by giving some commentary on the level of interest you've seen for that business.
Okay. Thanks, Paul. On your first question around self-help and continued market weakness, is there more we can do if that continues into 2020? I think there is more activity that we've got. So as a first comment, remember we said the GBP 20 million to GBP 30 million of annualized savings will be realized by June 2020, so that would continue. I think it will depend on the level of volume growth that we'd see in the market or otherwise. So we have our contingency plans were we to go into a downturn as to what we would do to respond to those market conditions. So we've got a plan. I think there's more that we can go after. And as ever in a business, you -- whilst you set out a plan, events that you haven't anticipated or the timing of those events is always different. So you have to be alive and responsive to the conditions in front of you. So we're constantly working with our businesses on thinking that through. I suppose the threat of a no-deal Brexit and the impact on the economy means that we're in a heightened state of preparedness as to what those contingency plans would look like.On the Plumbing & Heating, and then I'll hand over to Nick on the alignment question. This is primarily about the market uncertainty. So we've had a good level of interest but in particular, the -- some of the sponsor community we've been speaking to are finding the financing challenging in these conditions. They can get the financing, but maybe not at optimal cost. And therefore, we don't think we can get optimal value for our shareholders for the business. So I think it's appropriate to pause it for the time being until conditions normalize.
Good. Thanks, Alan. Paul, thank you for your question. And yes, you are correct, I am very aligned with the plan, as you know from our conversations previously. But to your point about thinking differently, yes, clearly. Look, I'll be and I am actively looking at many areas. Technology and data will fundamentally change the way in which all businesses operate progressively over time, and that's an area of considerable interest for me. As well as looking at how we optimize and really drive efficiency further into our supply chain. You mentioned Range Centres, and clearly, we've taken some decisions there, but looking more broadly as our businesses grow at how we might think about our distribution and logistics in a very different way. And clearly, as I speak to our customers, large, medium and small, I start to think about how we will partner with our customers much more seamlessly in the future. So I think over time you will see plenty of evidence of thinking differently, and I look forward to talking to you about that more in due course.
No, it's great. Can I just have one just very general follow-up? I mean you've given quite a cautious outlook but you're confirming the guidance. I'm basically wondering, has anything actually really changed in your thinking about the market or the group performance since the first half? Or is this really just very much in line?
Paul, I say it's largely in line. We did highlight at the half year and certainly in the -- on the Analyst Meeting that we'd seen the market start to slow from mid to late May. So -- and I always said that this would be a very difficult year to read because of the unusual weather patterns and the impact of that in the comparator year. So I think the market has slowed a bit more. I think that started in May. I don't think it started in September. And I think we'll continue to see that uncertainty until the economic and political clouds start to lift.
The next question today comes from Robert Eason from Goodbody.
Just a real general kind of question in terms of just given the well flagged kind of more challenging market conditions, as you say since kind of mid to late May. Have you seen any behavioral shift in the market, either you're doing it or general competitors in terms of extended credit, gross margin behavior, bad debt behavior? Is there any variations to your -- the different types of businesses within Travis? So just kind of a general chat around that in terms of, I suppose, what I'm looking for, is there any canaries in the coal mine that you're focused on?
Yes. Robert, that's really good question in the current context. I think the more difficult volume is to come by, I think, the more we'll see and some competitor reaction on gross margin or extending credit. So particularly, some of the smaller regional players we've heard noises about offering extended credit terms within the market. I think we haven't seen in our business particular trends on bad debts as a proportion of credit sales. What we are seeing is occasionally contractors or subcontractors who you think are solid just disappear with a few days' notice if that from the marketplace. From a gross margin perspective, we're pretty disciplined. But we will -- it's our job to trade our business at the same time, so we'll be alive to the changes. Our focus is on the drop-through of the gross profit that we can generate from our outperformance to the bottom line and making sure we get as much as possible to drop through.
So if I describe that, there's been some incremental changes regarding kind of extended credit, et cetera, but nothing too [indiscernible]?
I think they are isolated events rather than it being enough to call it a trend at this stage, Robert. I'm also hearing chatter from time to time that 1 or 2 smaller merchants have started to lay off some staff as well in response to softer volumes. But I don't think there's enough to call that a definitive trend at this stage.
Okay. And maybe just one more kind of very general question. Just in terms of -- what regional differences are you seeing, is it the same as we've been seeing for some time now kind of Southeast versus the rest of the country? Any shift in that? And any further commentary you can give on different trends by the segments, RMI, new build, nonres? You call out nonres addition in the statement itself.
Yes. I think the regional differences are really a continuation of the trend that we've seen. So for example, the Northwest continuing to be very strong. The London and the Southeast being weaker. We've seen the Southwest slow a little, but I think that's more a reflection of the slowing overall market. I think on segment, we are seeing a real slowdown in new housing starts as opposed to building out developments that were already in construction. We've seen some of the groundwork activity slow, but I -- that could well -- as well be due to the fact that we've had a really wet 4 or 5 weeks. So it's difficult for them to get on the ground rather than it being a more sustained trend.
We now have a question from Howard Seymour from Numis.
A couple from me, if I may, on unrelated areas. Firstly in terms of the market share gains that you allude to. First half you pointed out that that was mostly large contracts, and I'm just wondering if that's been a continuation there. I like the fact that clearly a lot of the big-house builders specifically have kept on building, just taking onboard what you just said, Alan. But just this first question, have you seen a material shift in your pattern of market share gains? Or is it, as you said, just a continuation of where you were in the first half? And I will come back to my other 2, if possible.
I think it is a continuation, Howard. What we're saying in the first half was that our larger customers were growing more quickly than the smaller players within the marketplace just a -- that was less a reflection on share gain with the larger customers, just where the growth was coming from. Notwithstanding that, yes, we have had, we think, some share gain on the larger customer side. I think our share gains are also more in depth towards the more heavyside within the general merchant.
I think there are some sort of detailed points as well, Howard, around share gains within our Managed Services portfolio and growth in our Tool Hire business as well, which I think is exciting for the future.
Lovely. Second one was just on Kitchens & Bathrooms. So you allude to the fact again that doing well in that market that the installations have gone up. Can you just talk a little bit more about that? Again, is it a continuation of where you were in the first half? Or have you seen quite decent gains specifically? And are they more targeted, [ re the ] installation? Or again, is it more general situation in terms of your position versus the industry?
I think what we're finding, Howard, is a trend in the market. And this is -- I should stress, this is within the Retail business, for those less familiar with the story. We are seeing a greater desire from customers for a, what I would call, an end to end or turnkey "do it for me" solution, particularly within Kitchen & Bathroom. So the bathroom piece is growing strongly this year. And also clearly, the larger part, the kitchen showroom. So we will be approaching, I would guess, 60% of the kitchens we sell now being installed and we are extending some of the specialist services around that. So for example, offering a tiling solution as part of the kitchen installation where we -- that enables you to capture the sale of the product as well as providing the service. The key to doing this well is having really good control over your -- making sure that you deliver on time in full. And a kitchen can be over 100 boxes that you have to deliver, so that you avoid repeat visits and you avoid cost of failure within your supply chain. And that needs a real disciplined, well-organized team. So we continue to win awards for the installation service that we offer within the Wickes business. And we think that will continue to be a growth area in the future.
Okay. Great. And then just final one from me. Grafton alluded, the other day, to issues in Holland related to nitrogen emission, and obviously Toolstation European business is a focus in Holland. Have you similarly been -- started seeing some aspect of that? So just thoughts on that, please.
Yes. No, we aren't impacted at all. Toolstation Netherlands business continues to grow really strongly. So we have added more branches since the half year. I would say, however, that the nature of the Toolstation business, particularly in Holland, would be more focused on RMI-type projects and servicing the small installer. So that may be different from how competitors are configured in their businesses.
The next question today comes from Arnaud Lehmann from Bank of America Merrill Lynch.
I guess my first question is on Merchanting. As you mentioned, in the first half you already had some growth in the heavyside. That seems to continue in H2. But on the other hand that meant that, if I remember well, the margin in the first half in Merchanting was broadly stable. So you continue to grow probably a little bit in Q3 and H2 in Merchanting, probably mostly pricing over volumes, I assume. But considering all these moving parts, would you expect another stability in margin in the second half? Or do you think you can extract some margin gains from your cost-cutting initiative? That's my first question.Related to that, I guess, could you give us an updated consensus estimate for the full year? You say performance remains in line with our expectations. Can you please clarify a little bit what are your expectations, I guess, especially post IFRS 16? And lastly, maybe a more medium-term question for Nick. You've got Toolstation in Europe, I guess that's your first leg of Tool in Europe, to put it this way. Do you have any more ambitions outside of the Netherlands? Could that be a first step towards expanding Travis Perkins in Continental Europe especially if the kind of medium-term outlook is U.K. is potentially a bit slower?
Okay. Thanks, Arnaud. On your first question on Merchanting, and you're right on the heavyside growth continuing. Clearly, heavyside is a lower-margin percentage business at a gross margin level. And I reiterate my earlier comments about focusing on drop-through. So from a mix perspective, clearly that is a -- it has a slightly negative impact on your mix if you grow the heavyside faster than the light side. I think I would anticipate margins being broadly unchanged at the bottom line rather than saying that you would expect to see margin gains. I don't think you would see margin gains in the current context. If I look at current consensus, so post-IFRS 16 but excluding Plumbing & Heating, the market is around GBP 395 million at the moment. It is really difficult to read, however, currently because not everyone has adopted IFRS 16 in their forecast at this stage.
Good. Thanks, Alan. Arnaud, great question on Toolstation in Europe. And obviously, the acquisition of majority share there is a really positive move in the quarter. First of all, we're really building well on our base in The Netherlands and seeing really positive progress there. And recently, the opening of the store in Belgium has allowed us to expand our operations there through web as well as the physical stores service from the Netherlands. What I'm excited about is as we test the format further, as we grow in France, so we currently have 11 stores in Southeastern France and we're looking about -- we're looking very carefully at accelerating the growth of our network there as well as the distribution center. So it gives us the opportunity to further test the proposition, further evolve the proposition alongside our growth in the U.K. And I will be looking very carefully with Alan at what that means for further growth in due course.
We now have a follow-on question from Charlie Campbell from Liberum.
Yes. Probably a couple of questions from me. Just on Toolstation Europe, we can see you bought a controlling share. Does that mean you now own 100%? Or does the founder still retain some equity in the business? And also just a sort of question really on the founder's continuing interest within that business, whether he's staying on. And then secondly, just wondering if you could give us a bit more color on the Merchanting part that's not the core, if you like. So just sort of a bit more commentary around so what you're seeing in CCF, BSS and Keyline as well. So just a bit more color on those would be helpful.
Sure. Charlie, on Toolstation Europe, the founder remains involved. Although he has sold his shareholding to us, so he's still involved with the business on an ongoing basis. Our ownership is now over 95%, but not the full 100%. There are some options in the future to take the 100%. But we've accelerated clearly by mutual agreement, one of those options to take the ownership over 95%. So it will be fully consolidated and then we will have a small minority interest that we'll remove. On the specialist merchants, I think we feel we continue to gain share in those businesses. So if I make a few comments on CCF, first of all, we've seen the market slow a little during Q3. So we -- at the same time, we've seen some of the allocation, that we've referred to previously, ease somewhat. I think that's a greater output into the market for more capacity. But at the same time, the fact that volumes have softened has made the situation a bit easier to manage. I think we've seen, from a Keyline perspective, I said earlier some of the new starts slowing. The -- we've been pleased with the overall performance of all of the businesses. But also within BSS, we have continued to perform really well within that marketplace, notwithstanding the softer environment.
So the next question today comes from John Messenger from Redburn Europe Limited.
Two if I could, please. One is just on Toolstation Europe as we were just talking about it. Could you give us a bit of an idea, a rough idea of dimensions of it, just so we're all thinking of that in terms of obviously kicking in for a quarter and a bit for this year and for next year? Kind of -- it was obviously down after tax, it was a GBP 4 million loss in full year '18 and GBP 2.5 million kind of loss in the half year. Is that a business that will be positive in terms of EBITA, I guess, looking forward? Just to have a rough idea of the size, top line sales and trading profit. And the second question was, when we think about the Retail side, obviously the comparatives last year in Q3 were pretty weak, minus 7.2%, I think. Clearly, there's a big swing in the fourth quarter. Should we be thinking about business more of a 2-year like-for-like? And obviously it was 1.8% in the third quarter. That 1.8%, clearly, a function partly of the way that [ price ] has taken share in the market. Is that something that you'd expect broadly similar in the final quarter? Or should it be stronger in terms of maybe if we should be thinking around that 2-year LFL figure and holding the 2 percentage? Or is it something that you'd actually be more confident on? Those are the 2 things.
Okay. John, on Toolstation Europe, first of all, clearly, we're in a heavy investment phase in terms of the structure to get the business going. Roughly the revenue in the current year would be on a full-year basis, EUR 40 million to EUR 50 million and probably in the order of EUR 15 million to EUR 17 million loss within the business at this stage. Clearly, a reasonably fast-growing business. We'd see the -- on a sort of like-for-like basis, over 20% like-for-like growth. On the -- on your question on the Retail business. So in Retail Q4 '18 was 3.5% like-for-like, so quite a turnaround from the 7% or so sales decline on a like-for-like basis that we've seen across the first 9 months. I'm not going to get into exact predictions on the 2-year or 1-year like-for-like, that would be inappropriate, but we're very comfortable with the current trading trajectory in the business continuing.
Right. Sorry, can I just come back as well -- and I'm not sure if you'll disclose it at this stage. But Toolstation Europe, how much has the group invested in terms of the shareholding increase?
Well, it will be disclosed in the annual report and accounts.
So the next question today is going to come from Gregor Kuglitsch from UBS.
I've got few questions left, please. So the first one is just on cost savings. I know you flagged the cost saving run rate target in the statement today. But if you could just remind us, I believe this is costs from last year or initiatives rolling into this year. So kind of how much do you expect to deliver into the P&L this year in 2019? And how much is left based on what you've announced so far for next year? So if you could just simplify for us what the sort of incrementals are. It's a little bit difficult for us to calculate. The second question is just on Toolstation Europe again. So did I hear you say EUR 14 million to EUR 15 million trading loss, is that right, EBITA I guess in euro terms?
Yes.
And then as a follow-on to that, how quickly can that become breakeven? Because obviously it's quite a -- it's actually reasonably material in the context of the group. So with the business plan, I appreciate that you'll [ spend ] a little bit on growth. But if you could give us some help as to when that could reach breakeven in your business plan at least. And then finally, which is purely housekeeping, from an accounting perspective, do we need to -- are you still allowed to keep P&H discontinued? Or do we now have to reintegrate that back after having taken it all out given that you suspended this [ whole ] process?
Yes. So on the cost savings, Gregor, obviously of that GBP 20 million to GBP 30 million by the year-end, over half of the actions will be in train. Delivery in the year though will clearly lag that because of the timing of when the initiatives have been implemented. But I just saw certainly GBP 20 million annualized of activities will have been put in train, but you would expect the -- maybe half of that, if you average it out, delivered within the year. On the Toolstation Europe question and when we can breakeven. It's a challenging question in that it depends how many markets do you into. Because clearly, as you're starting up on those markets, you're going to incur relatively heavy losses. There is a breakeven point in terms of the number of shop units that you need to reach that. What we've been doing over the last few years is investing in a -- in an infrastructure across the European businesses with some shared central functions, if you like, for Toolstation Europe to get the business going. I appreciate it's a -- in your words, a relatively material number in the context of the overall group. We will only invest in markets at full board when we're confident in those markets. Hence, what we're doing at The Netherlands at the moment, we're very confident there. And as Nick described earlier, we're in test phase in Belgium and France at this stage. On the Plumbing & Heating accounting treatment. So it was actually recognized in the half year as discontinuing rather than discontinued. The way that the accounting standard works for this, there are effectively 2 tests. The business has to be salable in its present condition. We certainly meet that criteria having successfully completed the separation at -- during May in particular on the transactional IT systems. The second test is that you have to demonstrate that you've got active interest in a marketing campaign. So how we meet that criteria will depend on the circumstances at the 31st of December. You all have seen, I've spoken about Plumbing & Heating within the context of those overall numbers today and also excluding that, because it will depend on the conditions at 31st of September (sic) [ December ]. But I think it will be -- from your perspective, it would be prudent to still continue to forecast the Plumbing & Heating business.
We now have another question from the phone lines and this is from Ami Galla from Citigroup.
Just 2 questions from me. The first one was on the plasterboard supply. You've mentioned that the tightness has been easing more recently. I was wondering if you could give us some more color as to is this demand led. Or to what extent is this -- have you seen a capacity increase in the space? And to what extent should we expect these conditions to prevail into the next year, essentially seeing a better supply chain in that material? My second question was really on the additional stock that you have built up on the back of the Brexit date. Can you give us some color as to what is the additional stock that we should expect to unwind following a Brexit conclusion?
Sure. I mean on the first one on the plasterboard supply, I think we have seen some increase in output, but it is as well a question of the demand in the marketplace. It wouldn't surprise me if volume is actually slightly lower year-on-year at this stage in terms of overall meter square of plasterboard sales out within the marketplace. I should stress that's not a comment on our own position within the market. We would expect to see those conditions to continue to ease such that it's no longer an issue come early mid-2020. And then on your second question around the additional inventory, and we've maintained those higher stock levels at this stage that we built. As a reminder, it was around GBP 30 million in 2018 and a further GBP 50 million by the half-year 2019. In fact, in -- we've been at those elevated levels since late Feb, early March now, having anticipated first the 29th of March and then the 31st of October. As to how it unwinds, I think that question is probably best addressed to Westminster at this stage, unless the politician decides to put it back to the people.
We now have a question from Clyde Lewis from Peel Hunt.
Two if I may. One on the sort of the trading pattern throughout the third quarter. I mean, I think, Alan, I think you referred to sort of September not being massively different to sort of May in terms of the softening trends. But then you sort of talked about sort of incrementally more challenging through the course of the summer. So -- and certainly we've heard from others that September is quite a bit tougher than sort of July, August. So I'm just looking for a little bit more color on your trading pattern through Q3. And the second one I had was, again, I suppose around the commentary you're making on pretty strong heavyside sales and how that sits with the comments you made about weakening housing and weaker commercial activity, which would generally be the bigger element for sort of heavyside sales. So I'm just sort of trying to square that particular circle as it were.
Yes. I think one that latter point, Clyde, the comments about stronger heavyside is that within the general merchant, that is where we've seen the strongest share gains rather than it being a reflection of the marketplace. On the trading pattern through the quarter, we -- I did say we've seen incrementally more challenging. The nuance I was trying to make was we actually thought the market started to soften from mid-May onwards rather than that being a particular phenomenon later in Q3. I think it's from -- certainly from mid-May onwards, we saw the market step down a point or so, and then maybe it's stepped down a little further as we got into the early autumn. But I don't think it's a hugely different trend from the softening that we've started to see. That's the point I was making.
Sorry, just -- I want to just add, just a nuance to Alan's point on the heavyside. I mentioned in my commentary around the progress we're making in empowering local decision-making, particularly around heavyside in our range. And I think what we're seeing is some of the benefits of that really stocking range that our customers want at the local level and ensuring that we are really majoring on that category. And we're seeing some benefits of that starting to show through. Very early days.
So we now have a question from Paul Checketts from Barclays Capital.
I've got 2 questions left, please. The first -- this year you've had to contend with large currency swings, with the pound being weak and then bouncing back more recently. How have you been managing that? And to what extent is the recent strength a bit of a relief? And then second, I'm just returning to the Plumbing & Heating side. It seems this transaction was very close at the time of the half year results. Did a buyer walk away? And then related to that, what do you think essential time frame is now for the disposal of the business or the separation in some form? And as a consequence of it leaving -- at the strategy update we didn't really talk much about the Plumbing & Heating business, but given that you'll be managing it for a bit longer now, can you just run us through precisely what the plan is?
Yes. Paul, I'm afraid I'm going to disappoint you on Plumbing & Heating because it would be inappropriate to go into the detail of where we are or were with particular buyers. That I would consider too sensitive for a call. In terms of managing the business, we have been really pleased with the ongoing performance within the Plumbing & Heating business. So we did talk at the half year about growing the operating profit in the half by 9%. Clearly, we have a -- we put a lot of effort into the transformation plan. And at the time that we held the Capital Markets Day, we were still only halfway through that transformation plan. So we are very comfortable continuing to manage the business. It is a Merchanting business after all, and the reasons for the proposed divestment of Plumbing & Heating were different from the circumstances surrounding the recent decision to demerge Wickes, namely a question of longer-term market economics. So hopefully, that helps on that. On the currency management side, we've always had a program of rolling hedges and averaging out the cover that we got in the business. I get the point that the currency has moved around. But maybe I have a few more gray hairs than you and I don't consider the levels of currency volatility historically to be that large. I think that's just one of those things that you have to contend with as a business and have a strong management progress and really good people like Graeme in charge of it.
We now have a question from Mohit Rathi from AlphaValue.
Yes. So if I remember correctly, I had just one question on the full-year guidance of the company. And if I remember correctly, in 2018 final results, you mentioned that 2019 operating profit -- adjusted operating profit would be similar to 2018 level. Now that you have been -- you have maintained the full year guidance, despite the fact that during H1 '19, adjusted operating profit grew by, I think, around 15%. So what are the key reasons why we are maintaining the full year guidance of similar or stable adjusted operating profit despite this 15% surge in H1?
Okay. Thanks, Mohit. I think the comment around -- that you're referring to around being similar with a comment from our full year results for 2018 back at the end of February. And we have said along the way that our second half performance, we'd expect to be similar to 2018 and 2019 as well. It was that H2 performance in 2019 we expected to be similar to H1 '19 as well as similar to H2 '18 roughly. So that the -- following the half-year results, I think the -- we saw the consensus move up, which reflected the strong delivery in the first half. I am not expecting numbers to change in any way given that we've said that H2 '19 would be broadly similar to H1 '19 in terms of a more even profit split and also at the same time, similar to H2 '18.
Okay. So that roughly means that we can expect somewhere around 10% growth in adjusted operating profit at least?
What I said earlier, it's really complicated because of IFRS 16 and how people treat Plumbing & Heating. But with the current consensus levels that we're seeing, including IFRS 16 and excluding Plumbing & Heating, are around the GBP 395 million or so level.
The final question today comes from Rajesh Patki from JPMorgan.
I've got 2 questions, please. First one is if you can maybe you can comment on trends have been in the first 3 weeks of this quarter across the business? And the second one is on the Retail business. One of your competitors is talking about investment in price for the second half. Can you talk about how you're seeing the competitive trends in that part of the business evolve?
Yes. I'm not going to get drawn into specific comments on 3 weeks of trading. An so if there were any -- put it this way, if there was anything materially different from what we've seen in the previous 4 months or so, we would make that clear. From a retail perspective and investment in price, I think from our analysis, we maintain our value leadership compared to our competitors in the DIY market. I don't think that's changed materially over the year. We've consistently been, by our calculations, about 6% or so cheaper than the nearest competitor from a pricing point of view. Clearly, there are, from time to time, investments that competitors make in particular categories. We have maintained our everyday low price-type approach to the market and have supplemented that with some really strong and effective promotions at key points during the year.
Thank you. We have no further questions. I will hand back over to you, Nick.
Super. Well, listen, thanks to all for joining us this morning and thanks for your questions. I hope that's been useful, and we look forward to speaking to you all again shortly.
Thank you.
Ladies and gentlemen, that does conclude today's call. Thank you again for joining. You may now disconnect your lines.