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Welcome to you all. Good morning. Welcome to our Q3 trading update. And I can't believe it's only been 6 very short weeks since our half year analyst briefing when we were last together.I'm here, as normal, with Alan Williams, Group CFO; and Graeme Barnes, our Director of Capital Markets. And I hope that you all and your families and all your colleagues are remaining safe and well wherever you are.We'll keep this update brief and obviously invite questions in the normal way. Today, we report a positive Q3 performance with continued recovery in all parts of the business in the face of continued challenges caused by the pandemic. We know that, as it's -- continues to swirl around us. We saw positive signs in July as trade returns, with domestic RMI as the key area of activity, which included the continued strength of DIY, as we discussed a few weeks ago. August saw a softening of our trade customers' business, as well as non-trades, as people took holidays, but September's performance has been strong as trade returns to kind of more normalized patterns after that holiday period, again mainly in domestic RMI which really benefits, as you know, our Travis Perkins general merchant business, particularly plumbing supplies, Toolstation and Wickes. Our larger housebuilder, the kind of commercial segments, public and economic infrastructure, remains slower, but gradual improvement continues, which is really encouraging.And we continue to drive our strategic agenda hard. We continue with our theme of simplifying the group with the sale of Tile Giant in September after disposal, obviously as you'll recall, of PF&P back in January. And we continue to focus on strengthening the core of our business, driving operational improvements across the business following what's been excellent reception of customers, following the closure of some of our branches back in the summer.We continued to make excellent progress in the face of ever-changing pandemic restrictions to clearly lockdown in Northern Ireland, Republic of Ireland and Wales, plus the increase in the number of Tier 3 areas and restrictions around the country, but we retain our kind of relentless focus on keeping our colleagues and all our customers safe while trading hard and pivoting our operations as we move forward in the face of the pandemic.Our outlook provides guidance that we expect the full year 2020 to outturn within the upper part of analyst expectations.So with that, let me hand back to you, Rita, and invite questions from you all.
[Operator Instructions] And the first question from the phone lines comes from Yves Bromehead from Exane BNP Paribas.
I'll keep it brief to 2 questions. First one, could you just comment on the trends that you have seen in maybe October? Should we extrapolate what you have been talking about on the September month into October? That's my first question. And second of all, could you also maybe comment on what is missing today for you to come back to any kind of update on the potential demerger of Wickes? And also, when do you expect to update the market on your dividend policy?
Alan, do you want to tackle the first one? And I'll come on the second one.
Sure. So Yves, on the trends in October. So clearly we're only 3 weeks into October at this stage. And we are seeing more lockdown measures, but when you look by end market and also by each of the reporting segments, the trends that we're seeing so far are following what we saw in Q3.
And Yves, just on your second point, I would refer you back. I won't read through it, but I would refer you back to the position we made clear just 6 weeks ago regarding Wickes and the dividend, 2 topics that obviously remain front of mind for the leadership team and the Board. But as we said there and as Alan just said, as we face into changing conditions on the ground and as we face into what we continue to think will be a long and uncertain winter, then we will make the appropriate statements at the right time regarding both of those issues.
The next question we have comes from Priyal Woolf of Jefferies.
I've just got a few, to keep it brief. So firstly, in terms of merchanting like-for-like, I just wondered if you could split it between what's going on in the general merchants, so TP, versus some of the specialist businesses. I'm just trying to work out if some of those smaller trade-focused businesses are back to growth now as well. And then the second question is you've obviously said there's no appreciable impacts from price inflation. Can you give a little bit more color there or that pockets of price pressure coming through either in terms of more competition or cost inflation as well?
Priyal, Alan. Nick, maybe I'll take those two, yes. So on the breakdown of the merchanting like-for-like, I think it's instructive to look at the end markets rather than any individual business units, and that helps you understand the position overall. So as we put in the statement, the strength we're seeing is more in the RMI side. And new housebuilding and larger construction projects, in particular in commercial, are still lagging. So I think that helps you understand the underlying trends. The general merchant business is heavily indexed towards RMI. Our plumbing & heating business also has a -- significant exposures to the RMI side, so that's helping the trends there. I'd say, on the weaker side, given the new housebuilding and commercial projects lagging, you'll naturally see Keyline and CCF, but it's entirely a reflection at this stage of their end markets. And on your second question, the pricing environment overall at this stage is relatively benign. We'll have to see what impact Brexit may have on currency-related elements, but it's -- at this stage, it's relatively stable. As you'll see, when it comes to underlying materials and commodity inflation, we've seen some increases coming back into the timber markets, but the rest of the environment at this stage overall is relatively benign as a -- from a commodity point of view.
The next question we have from the phone line comes from Aynsley Lammin from Canaccord.
I'll stick to 2 as well actually. Just firstly, I wondered if you could comment on kind of product availability. Given the surge you've seen in some of the areas, are you having any issues kind of meeting demand in any product lines? And has that been a constraint in any way across the businesses? And secondly, just on the net debt guidance you gave at the half year, I assume that hasn't changed, may be a little bit better given the kind of upgrade in group EBIT.
Yes, Aynsley, just on -- if I start with the net debt and then move to availability. At the time of the interims on the 8th of September, I gave a range of plus or minus GBP 50 million around the position that we were seeing at the time. And I think that we're more or less still there on here. And on the -- I think the key message here is that the cash position and liquidity that we see continues to remain strong. Our credit teams are doing a fabulous job collecting from trade debtors, but as the business starts to recover more and in the trade businesses in particular, you will see the trade debtor book increase commensurately. But as I said at the time, I'd expect a lot of that to be funded through increased EBITDA as we go through. From a product availability point of view, we are still seeing impacts. So there are some heavyside materials, but it's more, for example, around plasters. We were still seeing some patchiness on products like that and then also in lightside categories. It's not materially impacting our sales, but we would prefer to have greater depth in stock in some areas of products, particularly in Toolstation and Wickes and then, from a merchanting point of view, in the categories [ like plaster ].
We now have a question from Robert Eason of Goodbody.
Just my first question is around the retail business, specifically around the kitchens and bathrooms business versus core. Can you just give us a bit of color how the kitchen and bathroom business is evolving, and because obviously that went through a bigger shutdown in Q2, distinguishing between what you're delivering and the -- what the order book looks like with that business? Also, like you've alluded to like in terms of your collections has gone well, but I have just a general question about bad debt. Like is there anything emerging in the system as people become -- come on their working capital strains as the market picks up? And just your comments around the housing market, are you seeing any big regional differences as the housing market starts to get back up to reasonable levels? And they're my kind of 3 areas of questions.
Okay, thanks, Robert. On the first one, around the kitchen and bathroom business versus core, the kitchen and bathroom delivered sales in Q3 were lower year-on-year. We've certainly [ stepped up significantly and/or back out ], clearly, doing installations within that number. Lead metrics, on the other hand, are positive year-on-year. I think the -- this is where we see the strength of Wickes in digital in particular. So we've got a significant growth in web leads, which are translating to appropriately distanced store conversations with customers and also home visits. Now we'll have to watch how that evolves with -- in particular with regions going into Tier 3 of the government measures, but I would expect to continue to see for the time being that delivered element step up from a position we're in. So what does that mean? It means that the core numbers are extremely strong. So core will be in -- year-to-date probably into double-digit year-to-date growth even including the lockdown period during April and May.On the bad debt side, at this stage, we are not seeing any particular change in pattern from what we've seen earlier in the year or, for that matter, last year. And as a reminder, in our half year results and under IFRS 9, we have looked forward to what we think may be a bad debt experience more in line with the recession. And that was reflected in the provisioning that we took at the half year. On your final question, about regional differences in housing market, we're not -- if you're referring to new build and the build-out, we're not seeing material differences at this stage. I think, from a house price point of view, we did see the updated stats in the last couple of days by region which were published and also have seen the number of housing transactions. And whilst housing transactions in August were getting back to a level in line with prior year, I would note that, that will be a mix of transactions that have taken -- been planned and taken place since lockdown lifted but also a lag from Q2. Year-to-date housing transactions in the secondary market in the U.K. is still down 20% at this stage.
We now have the next question from Arnaud Lehmann from Bank of America.
2 questions on my side. Firstly, on let's say lockdown measures. So can you operate properly in both Tier 2 and Tier 3 areas? And related to that, how prepared are you for a potential second national lockdown? I would expect you to be in much better shape to deal with that this time around. And secondly, on merchanting, quite impressive recovery in Q3, like-for-like down 3%. To which extent was that supported by the store closures? I mean, if you -- did you calculate -- if you didn't have the store closure, it would have been worse because, I guess, you were focusing on the most efficient stores.
Yes. Arnaud -- sorry. Should I start, Alan? And then you pick up the second one?
Yes, yes.
Arnaud, thanks for your question and obviously very [ pertinent ]. We are extremely well placed to operate through the ever-changing conditions that we see around the country. And as you will recall, we successfully navigated the first lockdown by pivoting our model very, very quickly in all of our branches and stores across the whole business. And since then, we haven't stopped working out the best way of keeping customers and colleagues safe while being able to operate our branches as close to normal as we can and obviously deploying technology in the right way. So we are well able and have been well able to navigate the Tier 3 restrictions in Merseyside, and obviously that's increased with Lancashire and now into Yorkshire over the last couple of weeks. We are well able to navigate Tier 2s. And we consider ourselves very well placed to navigate a national lockdown were one to come to pass. And obviously, in Wales we are seeing what is akin to a sort of a national lockdown over the next 2 weeks. We're extremely well placed to operate our branches. We have a well-defined and well-rehearsed operating legitimacy that we really honed through the first phase of lockdown back in March and April, which has an essential service to ensure the maintenance of critical infrastructure and to keep homes warm and dry as we move into winter. We have absolute operating legitimacy to make sure that we can remain open and we know how to operate. And in fact, I think we can operate better than we did back a few months ago, so we're really positive about that, which means that some -- we're ready for whatever the environment throws at us but absolutely with the focus on retaining safety and well-being of colleagues and customers at all times. Alan, do you want to comment on merchanting like-for-like?
Sure. So Arnaud, thanks for the question on that. I think, if you -- the -- at a group level, and we put this in the second page of the statement, the retention of sales from closed space adds about 3 percentage points to the like-for-like number. So if I translate that through to where we saw the branch closures, they were concentrated in merchanting and plumbing & heating. And we talked at the half year about plans that the various businesses had about retaining those sales. And as a reminder: Where they are the larger regional customers or national customers and we have longer-term arrangements with those customers, that tends to be much more on the delivery side of the business. So where we are delivering to customers and they are on the larger side, we've got some much higher retention rates. And the lower retention rates, you'd see in some of the more local trade, whether that's in the Travis Perkins general merchant or in plumbing & heating. If there isn't a branch as proximate and as an alternative supply available to the customers, we will lose some of that business, but the -- that 3 percentage points added back [ level ] is pretty much in line with the expectations that we talked about, at the half year results presentation, on retention.
The next question from the phone lines comes from Christen Hjorth from Numis.
Just related to that, the question before last. I assume, when we look at that September plus 8% like-for-like, we should also assume that there's a 3% benefit from that retention. And then looking forwards, to your guidance, I assume when you sort of point to current volume trends continuing, that's a reference to Q3 overall continuing to Q4 rather than sort of what you've seen more recently perhaps in that strong September. And then just the final one for me: You have pointed to sort of housebuilding and commercial being somewhat behind 2019 levels. I was wondering if you can just put a little bit more color on that. So are we talking about high single digits, low double digits behind? Just any sort of more color you could give there would be greatly appreciated.
Okay, thanks, Christen. So on the -- if we talk about Q3 overall versus September, so your second question there, and the trend that we're referring to in the outlook, it is more a reflection of the Q3 overall. I think it's quite -- I don't think it's appropriate to base things off just 3 or 4 weeks trading. So we have considered the overall impact that we have seen. And the retention rates, I'd expect to see them continue with these sorts of levels. And then on the question about new housebuilding and commercial, it's more the -- it's in the 10% to 15% down sort of range at this stage. Let's get very specific on that.
We now have a question from Charlie Campbell from Liberum.
Just sort of a big picture question for me. Lots of detailed ones have gone. But just sort of wondering if you can say anything about sort of order books on the CCF and BSS Industrial side because obviously there are some order books there, just what that's sort of telling you for sort of Q4 and into next year. And also kind of what the branch managers are telling you about some of the residential RMI tradespeople, what they're saying about their order books and their activity levels.
Thanks, Charlie. Yes, I think let me start with CCF and BSS because the two are quite different. I think, as Alan commented over the last couple of questions and I at the beginning around CCF, clearly the commercial market and the housebuilder market remain subdued, but it's -- but the recovery is continuing. There's no particular pattern to that but that it's steadily improving. The BSS Industrial, of course, through the kind of summer period, there was an awful lot of seasonal school and hospital work. As that finished in its natural course, we have seen just slower pickup through again that commercial, but there's been some really good activity that sustains around sort of student accommodation and projects like that. So as we look forwards, we remain positive about both those businesses, but the recovery, as we said in the statement, has been slower in some of those commercial and industrial segments. But we believe we've got strong market-leading businesses notwithstanding the comment Alan made a few questions ago around product availability in some areas and some categories. We remain positive, obviously, as we look forward to continued recoveries, we hope, into next year generally in the market.Interesting question, Charlie, around branch manager sentiment. And I'll extend that around all of our businesses in the domestic RMI segment because, of course, that does touch into local trades in our Wickes business as well as our trade customers in Toolstation, CPS and the general merchants. What our trade customers, smaller trade customers, are telling us is that they are -- they have good, positive order books over the coming weeks and months. Generally they're pretty optimistic about the domestic RMI market, lots of conversion of spaces within houses, lots of extensions as people rethink and -- rethink the layout of their home and the use of the space for obvious reasons. We're spending more time in them during the day and as well as the evening. So the sentiment there is positive. Obviously that's a qualitative measure that we keep very close to across the full spread of domestic RMI, and we hope to see that continue. The caution I'd just inject into that is, of course, coming back to Arnaud's question around the spread of Tier 2, Tier 3; and indeed, hopefully, the distance or low-risk prospects of a national lockdown. And that's the impact on tradespeople getting in to customers' homes. So whereas their sentiment is positive, they've got good order books and practicality of them getting in to customers' homes as people might lack confidence in them doing so, whether that's for a boiler refit or a heating upgrade or indeed a painting and decorating or indeed the continuation of a lot conversion, whatever it might be, actually getting in to customers' homes might be the constraint over the weeks and months ahead, as opposed to their order book. So we've watched it very carefully. We stay very close to them, but at the moment, that's looking as positive as it has done over the last few months. Alan, anything to add to that?
No, I think [ it's terrific ].
Is that okay, Charlie?
Yes.
We now have the next question from Jon Bell of Deutsche Bank.
I think I've got two. Just wondering what your kind of thinking is on the year-end cash figure. Obviously, you've updated us fairly recently, but any thoughts there? And the second one is in Europe and Toolstation. To the extent you can commercially, could you update us on the competitive environment and how you see the opportunity?
Yes, thanks, Jon. I think, on the year-end cash, I've not changed the guidance from the plus or minus GBP 50 million versus what we had when we report at the half year. Clearly that continues to go well at this stage, but I can't get much more precise than that at this stage. We continue to be really encouraged by the performance of Toolstation in Europe, whether that's the Benelux or French operation. Despite the increased lockdown measures in each of the 3 markets over the last month or so that we've seen, the business has continued to trade really strongly. That says to me that the multichannel operation that we have within Toolstation, its value to customers and the very high service level that they get continue to resonate strongly. So when -- our biggest challenge is always to recruit customers and get them to try on the format. When they do, we see very good retention rates within customers. So we're encouraged to continue to press ahead within the Continental European markets where we're present currently.
We now have next question from Gregor Kuglitsch from UBS.
A couple of just quick ones, please. Firstly, maybe just housekeeping. Tile Giant, obviously, was sold. Just checking if there was any proceeds. I guess it was probably negligible, but still. Second question is on gross margins. So personally, [ I'm a ] little bit surprised with that kind of growth in terms of top line. I appreciate, obviously, there's some flowback on the store closures, but considering some of the tailwinds you've got -- I think you flagged a few [ related to ] the provision reversal, the business rate holiday, that you wouldn't be a little bit higher on profit basically on a year-over-year basis. So I guess the underlying question is, is there anything else going on maybe on gross margin or something that offsets some of the tailwinds there?And then finally, I guess it's too early to comment, but perhaps if you can, is there any impact you're seeing from the Green Homes Grant? Or is that actually not flowing into business yet? I'm not quite sure on the timing. Obviously, it was launched in September. I'm not sure that the money is actually really flowing and whether it's even working at all, but if you have any color on it, that would be helpful.
Yes, thanks, Gregor. On the last one, it is a little early to comment on the green homes grants at this stage. I think there's been a relatively slow pickup and, talking to tradespeople, a relatively low awareness generally on an unprompted basis of the scheme. So our businesses are working with customers to point that out to them. On the question on Tile Giant, you'll be delighted to hear there were proceeds. The -- but it's not material overall to the group, bearing in mind sub GBP 50 million of revenue and a breakeven sort of business there. And the -- clearly the -- I'm not going to give a number on that, but the details will be fully disclosed in the full year results in the normal course. And there's nothing to draw your attention to and changes in trends in gross margin or overheads versus what we said with the interim results on the 8th of September.
We now have the next question from Ami Galla of Citigroup.
Just 2 questions from me. The first one, on RMIs trends as we look at the sort of order intake and trend -- demand trends in Q3. Has the level of work moved from outside -- "out of the home" activity to more indoor activities? Are you seeing that shift happen in terms of the RMI work? And my second question is on plumbing & heating demand that you've seen in Q3. Can you give us some color as to where does this trend within that broader plumbing & heating base?
Yes. Ami, the -- in a way, the 2 questions are interrelated. So the RMI strength that we're seeing -- or the trends that we've seen during Q3, particularly through September, will be more supported by -- in the work. And that would be particularly in an area like plumbing & heating. So what we've seen in plumbing & heating is a recovery actually across all of the different subsegments of the business. So whether that's the The Bathroom Showroom piece, the local installer business within City Plumbing but also social housing refurbishment returning rather than just the breakdown work and then also some of the larger national installers who we work with, we've seen their levels of activity pick up somewhat.
We now have the final question from the phone lines registered from James Rose with Barclays.
I wondered if you've got any KPIs internally that would tell you whether the better trading you're seeing in the nonretail businesses is coming from existing accounts. Or is it coming from -- or is there an element of new customers in there, sort of new trade account openings? And related to that, do you think you've taken share, market share, over this downturn? And then lastly but not least, M&A and sort of consolidation opportunities across the trade-focused space. I wonder if you can talk more broadly around that, bearing in mind your balance sheet might be in pretty reasonable shape by the end of the year.
Alan, do you want touch that? Or do you...
Yes. Arnaud -- James, on the M&A one, first of all, we are not particularly acquisitive. We will look at opportunities in white space catchments where we don't have a presence. We will also continue to look at product categories or markets where we have limited presence, and we see that as additive to the whole. So if I give an example of what I mean about that: if you go back to 2017, the acquisition of TF Solutions within the BSS business, giving us an air conditioning offer that we didn't have previously. So we'll continue to look at things like that, but I don't think anything more large scale would be on the agenda for us.Really interesting question about the existing versus new account openings. We are seeing a number of new account openings as well as existing customers. And so that will be a trend that is largely in line with what we'd seen over the 2019 financial year as well. In terms of taking share or losing share, it's actually really difficult to read those trends at the moment because of the different times that -- during Q2 at which players opened or closed around lockdown, the exposure they have to end markets. So you would expect someone who -- take a local competitor in merchanting who has exposure only to local tradespeople doing RMI jobs. They would be faring better than someone who has large exposure to national housebuilders or new house building and commercial. So it's quite patchy. That is then made even less clear by the number of branch closures that we've done, where naturally we'll have ceded some revenue to competitors in those local markets where we've closed. All of that said, I feel like as a business we continue to recover well. We have good support from our customers. And I'm very confident in our ability to continue to outperform our markets and generate value for shareholders in the medium term.
[Operator Instructions] We have had no further questions posted at this time, so we'll hand back over to you.
Well, listen. Thank you, Rita. And thank you all for joining us this morning; and to everybody who asked those questions, really good questions. And enjoyed the discussion. So thank you all. And we look forward to seeing you in March.
Thank you.