Travis Perkins plc (TPK) Earnings Call Transcript & Summary

Super well. Good morning, and welcome to you all. Thank you for joining Alan and me and my Group leadership team colleagues and broader leadership community colleagues here in the room this morning. We are very pleased to present the details of a good first half performance for the Group, with revenue up just over 10%, and operating profit broadly in line with a strong comparative where Merchanting outperformed with a revenue growth of 13.3% and adjusted operating profit growth of 9% against a strong comparative period and a challenging half for Toolstation as pandemic comps unwound and where our focus remains on enhancing our trade customer proposition. And as I'll discuss later, the breadth of the customer base of the business and our end market exposure provides resilience during uncertain economic times. And our strong balance sheet and focus on organic growth creates flexibility for the business to manage macroeconomic uncertainty. So first, I'll hand over to Alan for a finance update, and then I'll return to our operational and strategic update.

Thank you, Nick, and good morning, everyone. It's great to see a full room and lots of people who are interested in attending a face-to-face meeting. So I'm delighted by that. So turning for those on the webcast to Slide 6, first of all, the key financial highlights. As Nick mentioned, it's been a good first half overall both in terms of further progress in delivering on our strategy as well as in terms of our operational performance. Revenue grew by 10.3%, driven by recovery of significant cost price inflation, as I'll come on to describe in a little more detail shortly. Adjusted operating profit was in line with a very strong H1 '21 and some GBP 19 million higher than the first half of 2019. You'll also note the strong performance on adjusted earnings per share, 11.7% ahead to 51.6p. This was driven by a reduced share count following the buyback program and the corporate activity in 2021. Group return on capital employed, excluding property profits, increased by almost 1 point to 11.8% despite the lower year-on-year performance in Toolstation. And as I'll describe later, the first half saw a free cash outflow driven predominantly by the impact of inflation in our trade debtor book. We completed the return of proceeds from the Plumbing & Heating disposal via a further GBP 172 million of buyback. Lease-adjusted leverage of 1.75x was bang in the middle of the range of 1.5 to 2x, which we announced as our target last year, giving us plenty of flexibility for the future. And finally, the Board has declared an increase in the interim dividend to 12.5p per share, reflecting our confidence in the business' prospects. We're all aware of the significant step-up in inflation, which is brought in to start relief, I think, by this chart. Price mix was a little over 14% for the Group overall. In part, this reflects the annualization of H2 '21 manufacturer price increases, but it is predominantly driven by further price increases in H1 '22. The level of inflation obviously varies significantly between product categories and business units, but all of our businesses have demonstrated their ability to work with customers to pass on the impact. The reduction in volume that you see was primarily driven by the reduction in DIY sales in Toolstation, following a truly exceptional performance in H1 '21. Looking at underlying Group volumes, excluding the June 2020 closure program, they are around 10% above the level of volumes seen in the first half of 2019. And in terms of contribution from new space, approximately half is driven by the continued expansion of Toolstation with a modest but growing contribution from new space and the General Merchant, things which Nick will return in a little while. On Slide 8, I've broken out for you the drivers of the Group operating profit performance. Gross profit increased by GBP 54 million as the business acted to pass on the impact of inflation, both the pass-through of manufacturer price increases and selected general increases to mitigate in part the inflationary impacts in the overhead base. The gross margin percentage was modestly lower as a consequence of segmental mix between Toolstation and Merchanting, customer mix and also the impact of absolute high levels of product inflation. As we all know, overhead inflation is increasing and is driven primarily by salaries and fuel costs together with utilities inflation. While utility inflation levels are very high, we did enter the year with hedging in place. And furthermore, the overall cost is a relatively modest element of our indirect cost base. I've broken out separately the strategic investments we are making in the business. These are fully aligned with the plans we laid out at the Capital Markets update last September and our focus behind the Toolstation and general merchanting networks, driving our service proposition and improving our IT and digital capabilities. I separated out from this, the increased loss in Toolstation in Europe, which is driven by investment in the business, and I will return to this theme in a couple of slides. So turning to performance at the segmental level and starting with Merchanting. As Nick described, it was a strong performance, all the more impressive given the tough comparator from H1 '21. The General Merchant demonstrated outperformance with 12.2% revenue growth. We saw continued recovery in some of the areas which have been slower to pick up from the pandemic, such as social infrastructure. It was particularly pleasing to see good growth across the margin accretive value-added areas, highlighted by Kieran last September, such as Benchmarx, Managed Services and Tool Hire. The specialist businesses, which represent around 40% of the segmental revenue, again, delivered an excellent performance with revenue growth of 15.1% and good progress in delivering the future growth levers, which Frank and Angela showcased for you at the Capital Markets presentation last year. Operating profit grew by GBP 14 million or 9% as the businesses adeptly manage the cost inflation with operating margin coming in at 7.9%. Return on capital employed grew by 2 percentage points to 16% despite the impact of inflation on working capital balances growing the operating assets of the business. In contrast, it's been a tough first half in Toolstation following the outstanding growth seen over the last 24 months. As we all know, Toolstation is a great business with a market-leading proposition for our core trade customers, and we will continue to invest in the trade-focused business. In the U.K., revenue was 6% lower as the customer base normalized and DIY sales declined following that truly exceptional H1 '21. Over the last 24 months, we've added 140 branches to the U.K. network, along with digital and supply chain investments and as a consequence of this investment and the DIY sales decline, operating profit fell to GBP 7 million. In Europe, overall revenue grew by 7%. The business saw some similar trends to the U.K. with DIY-related sales reducing. This was less evident in France and Belgium than in the Netherlands given those countries start-up nature compared to the Netherlands. We opened a further 20 branches in the half with the network now virtually having doubled in the last 24 months. We also began the commissioning of a second distribution center in the Netherlands to support the Benelux expansion. The combination of network investment, including the DC and further digital and marketing investments to drive future growth resulted in an increase in the first half loss in Europe to GBP 15 million. And we now expect a full year loss in Europe of closer to GBP 30 million as a result. The progress is tangible, and the Dutch business remains on track to break even in late 2023. So as I noted earlier, the key driver of the working capital outflow in the first half of '22 was the growth in trade receivables. The growth in the trade component of receivables is roughly in line with the growth in revenue and is clearly a consequence of elevated levels of inflation. Our credit book continues to be very well managed with overdues as a percentage of credit sales and the DSO or days sales outstanding, largely in line with the position at the end of 2021. You'll see from the table that stock balances have also increased largely as a consequence of product inflation. But also when compared in particular to H1 '21 due to improved stock levels as availability challenges have now largely dissipated. The increase in stock value was fully financed by a corresponding increase in creditors. As a consequence of the impact of inflation on trade debtors and a modest step-up in the CapEx, the Group experienced a free cash outflow in the half of GBP 45 million. So looking at that CapEx in a little more detail, you can see that, as previously guided, base CapEx increased year-on-year. The increase is predominantly driven by investment behind our strategic priorities, along with a normalization to run rate of maintenance CapEx. In terms of the growth investment, this is focused on Toolstation branches and distribution facilities along with new and upgraded branch investments in the General Merchant including Benchmarx. I should also mention branch investments in TF Solutions which while modest are supporting very strong growth in that part of BSS. And as I covered at the Capital Markets Update in September, freehold property activity is an integral part of our strategy, ensuring we have long-term security of tenure of our best trading sites. During the half, we took the opportunity to buy in the freehold of the 3 branches in London and the Southeast as well as the Edinburgh, Loanhead branch, complementing recent acquisitions in 2021 of future development sites. On the disposal side, the number of transactions was lower but did include the Central Cambridge site, where proceeds will be received over the next 24 months. So in terms of the balance sheet, as I said earlier, we're in a strong position following the portfolio actions that were undertaken in 2021. As mentioned in my introductory comments, we completed the return of the P&H disposal proceeds in full via a further GBP 172 million of buybacks. Together with the working capital outflow described earlier, this led to an increase in net debt under IFRS 16 to GBP 902 million or 1.75x lease adjusted net debt to EBITDA. This is in the middle of the target range of 1.5 to 2x, and we expect to be in the lower half of the range at the year-end. I've also included for information on this table the covenant metrics under our debt facilities, which you can see demonstrate very significant headroom on both metrics. So in terms of guidance and outlook, over the last 2 years, we've taken actions, which have strengthened our businesses and we have reshaped the portfolio. Our businesses are proven winners with broad end market exposure, and we are confident in our plans and in our ability to outperform our markets. While we are mindful of the current macroeconomic uncertainty, the long-term fundamental drivers around markets remain robust. And these are underpinned by the government's commitment to decarbonization, infrastructure and house building. With our unique portfolio of businesses, the Group is ideally placed to partner with the construction industry to deliver on this agenda. Supported by resilient end markets, agility in responding to market conditions and great execution, the Group's merchanting business' strong first half performance is set to continue through the second half. The merchanting performance will be offset by the impact of both the normalization of Toolstation's customer base and the continued investment in the business in both the U.K. and Europe. As a result, the Group is expected to deliver a full year performance broadly in line with market expectations. And with that, I'll now hand back to Nick for the operational and strategic update, and then we'll be very happy to take questions.

Super. Thank you, Alan. We certainly think that those numbers represent a good performance. We all recognize that the level of uncertainty in the market has increased. But through the half, we've used our operational agility to navigate challenging market conditions in order to help our customers run their businesses every day, particularly in the face of significant inflation because we're in a better position to do that than ever before. We are a different business to the business we were 3 years ago. We're much more agile in the way that we operate our business with flexibility in CapEx and OpEx, a strong balance sheet, led by a clear strategy with knowledgeable colleagues and really focusing on our trade customers and outperforming the market whatever the weather. And that's underpinned, as Alan said, by our broad market exposure and our solid trade customer base. So we're really positive about the progress we've made with delivering our strategy and operating our business, particularly as our customers tell us that we're helping them navigate an uncertain environment. That slido poll image on the slide there, was taken at a recent seminar of the top 15 housebuilders in the U.K., all of whom are customers. And I asked them in a word on slido to describe us. What I did not get was supplier. What we got were advisers, trusted partners, solutions providers, another step in our journey to becoming the leading partner to the construction industry. So I'd like to focus this morning on 2 key themes. Firstly, let me take the opportunity to update you on the characteristics of our end markets and the nature of our customer relationships across those diverse segments and how in position relative to those markets the choices we've made within our strategy underpin the confidence we have in our ability to outperform the market whatever the conditions ahead. Secondly, let me update you on the progress we're making with delivering our strategy because it reinforces the robust investment thesis that we articulated at the CMU last year by always staying close to our customer and helping them meet their needs every single day. So let's look at the dynamics of our end markets and our customer base. We remain confident in the robustness of our end markets that we have chosen to serve. Economic and social infrastructure investment is urgently needed, whether it's new built roads or rail, [ the sort ] where Keyline is active High Speed 2 in Hinkley C, for example, or the repair, maintenance and improvement in schools and hospitals in Barking, in Tooting here in London, down in Brighton. And social housing, so active work for BSS, CCF and our General Merchant. More houses are required every single year to meet demand, and office and commercial space continues to be reconfigured for different patterns of work. And that's where CCF and our General Merchants are in such demand. And we need to continue to retrofit our legacy housing stock to improve energy efficiency and comfort, and let's be honest, in periods of extreme heat as well as those cooler winter periods. And you'll see that the breadth of end market exposure that we have gives us continued confidence in long-term demand drivers. And you'll notice that the much discussed domestic RMI segment is actually less than 45% of our revenue. But our strong offer in this space, particularly through Toolstation and the General Merchant remains absolutely vital as repair and maintenance, the R&M will always be less discretionary than improvement, whatever the market conditions. And therefore, that provides a natural hedge in times of uncertainty. But actually, the need for improvement in energy efficiency is likely to increase investment by homeowners, particularly as winter approaches. We serve these markets through our trade customers, and we relentlessly focus on honing our proposition to serve them better where our larger developer, contractor, asset manager and home house builder customers are served by our specialist merchant and our general merchant and our smaller professional trade and general builders by our General Merchant and Toolstation. The breadth and depth of these relationships, coupled with our national scale, provides a natural hedge in uncertain times. And an ability to adjust for the transient effects of consumer discretionary behavior or unprecedented events like COVID, allowing us to outperform the market. So our market-leading merchants are winning. We continuously review the market. We work closely with our suppliers. We work closely with our customers, we observe our competitors. And as Alan said, the H1 performance of our General Merchant was strong, outperforming the market and gaining market share by providing superior propositions in heavy building materials for our core customer segments, regional house builders, general builders, social housing providers and targeted investments in markets where historically we've under-indexed. And we remain confident in our ability to outperform. Similarly, our specialist merchants, BSS, Keyline and CCF continue to lead their markets and gain share, again, producing great results during the half through delivering and focusing on our strategy. Our businesses are focusing on deepening our relationship with trade customers and building on all the hard work over the last few years with gains in our customer satisfaction scores for pricing, for service, for knowledge and for convenience. And where customers are benefiting from local empowerment of our teams and the increased flexibility of our resource base, complemented by convenience and choice between a branch channel and a digital channel. And we've made progress in adding value to customers to. So let me deal with some specifics. Firstly, our higher services are going from strength to strength. In describing our strategy last year, we described our ambition to grow our higher service, which exists in over 250 of our General Merchant branches and our BSS business and where we were making additional investments in colleagues and skills in our branch teams to really drive growth during the first half and beyond, and we're very pleased with our progress. Our customer penetration is increasing, our sales are increasing, the integration with our core branch teams has enabled our core trade customers to access higher services quickly and easily. And we continue to make progress and invest in expanding the range and categories of equipment that we offer into areas like high and low access, for example, with very positive feedback from our customers. And we're also investing in efficiency through specialist hire hubs that give clusters of branches, access to different categories and a seamless service with a greater range of equipment. We're now successfully growing our hire business through Keyline, and we're trialing it in CCF where it's being tested and refined for specific customer needs. This is completely on the strategy. This is about growing services that add value to customers and which are both margin and ROCE accretive to our business. So let's look at CCF and carbon. Our progress in hire is evidence of us deepening our relationship with our customers. But our businesses have also made progress in adding new and added value to our customers' business. And CCF is one example where we've worked at elevating our relationship with our customers. The deployment that we talked about previously of our delivery management system technology, which provides a seamless end-to-end tracking and for delivered orders 2 sites at a time of customers choosing has enabled the integration of Scope 1 carbon data directly related to the delivered order. This is innovation, which has real value for customers. [indiscernible], Sir Robert McAlpine, customers who like us have got progressive ESG agendas that they want to perform against. And this, in turn, has created a competitive advantage for CCF, integrating operations with data through the use of technology. And with this, we will be able to continue to drive more efficient operations and the use of our fleet and further improve our own carbon performance and allow us to expand the range of data that we offer to our customers that helps them improve their business. Again, we're bringing to life our purpose goals about being at the heart of decarbonizing our industry. Measures that have helped us reduce our carbon emissions associated with the Group's vehicles by over 5% over the last 24 months. So let me turn to the point that Alan touched on around capital allocation, something we've talked a lot about before. Some of you, many of you actually, I'm sure, will recall Kieran, the MD of our TP General Merchant at the CMU explain our strategy of creating destination branches within target urban and fast-growing geographies where we're integrating our benchmarks kitchens and our higher services within the core branch to really provide a superior service proposition. This strategy to provide that leading proposition was at the heart of increasing our CapEx, where we were confident of driving superior returns on capital -- incremental returns on capital employed. We're very pleased with the results. Sales have surpassed our expectations and the customer feedback has been very positive, and this increased the penetration of both our Benchmarx Kitchens and our hire offer that I mentioned earlier. And especially in areas where we've under-indexed in the past. With new destination, Timber and Heavyside branches in Liverpool and Birmingham, new openings due in Manchester and Leeds, major refurbishments at Vauxhall here in London and it's soon at Birmingham Central, where we've acquired 2 adjacent parcels of land for a significant expansion to increase capacity. The branches have opened -- that have opened in fast-growing regional centers have also performed really well and produced strong results. In Ipswich, we relocated our branch in 2020. And a new branch already has increased market share by over GBP 9 million. We relocated our [ exit ] branch to a new larger site in 2021 and have seen gains of over GBP 5 million and similar gains in Farnborough. We relocated our branch at Edington in Birmingham to Minworth last year, and we've seen sales up 30% against 2019. And we also relocated our branch in Reading last year and have also seen sales up over 30% against 2019. We've also been repurposing property assets to enlarge our footprint and enlarge the reach in key locations. In Edinburgh, we moved CCF from a co-located branch with the General Merchant out to a new bespoke location across the road, which was a far superior offer for our customers, allowing substantial expansion of the TP branch and a new destination for our customers. Added to this, the new and refurbished branches allow us to maximize our digital channels to provide convenient, delivered solutions and Click & Collect for customers and to be much more efficient and flexible in the way that we use our resources, both colleague resources and fleet resources, allowing us to manage cost and improve carbon performance in the face of inflationary pressures. Again, this is absolutely strategy in action, enabling our merchants to gain share and outperform in those local markets, whilst also being ROCE accretive to our business. So to Toolstation. Toolstation is a brilliant business. And it's now established as one of the leading lightside distribution businesses in the U.K. with huge growth potential and with a first mover advantage in the European markets that we serve. There's no escaping the fact that the last few months have been challenging from our fabulous Toolstation team. But we've managed through the impacts associated with the shape of the customer base normalizing after the DIY surge of the pandemic because these are short-term challenges and we look beyond them. We laid out our plan to focus on our trade customer in Toolstation at our CMU in September, and that's exactly what we've done. And while it remains open to all, as we say on the front of every store, DIY and trade alike, our relentless focus has been to create the proposition of speed and convenience for our trade customers, and that will remain our goal in the short, medium and long term. And we have won and continue to win new trade customers. We have doubled the number of trade credit customers in Toolstation in the first 5 months of this year compared to all of 2021. And we continue to grow trade credit sales as a result. Our data shows us that our trade customers average order value was more than -- was 20% more in H1, and they shopped twice as frequently. The introduction of the trade credit account has really accelerated this trend. These customers, AOV is more than -- 50% more than other customers, and they shop 6x as frequently. This reinforces our confidence in the fact our strategy is correct, and we're doing the right things, which is why we have continued to invest in this business through the first half in the U.K. and in Europe, despite the changes in customer dynamic. We're building this business for the long term to benefit from this growth. And we've gone further. We've really accelerated the acquisition of trade customers by leveraging the power of the Group. Regional teams between the business have collaborated in a standout way to really accelerate the acquisition of trade customers into Toolstation from our other businesses. And we've also had the added benefit of quickly rolling out propositional enhancements from the U.K. into Europe to really shorten the maturity curve. Continued development of our app and website, which is so vital to our Toolstation proposition has been fantastic. We've got now over 250,000 active app users in Toolstation. And it's allowing us to reward our trade customers, which we're also doing between Toolstation and TP. And this channel and its effectiveness will be further enhanced when we open our new DC next year. These developments, coupled with our investment in the trade proposition is allowing us to achieve a world-class NPS of 78 in Toolstation. So we are really pleased with the progress we've made in Toolstation during the period. Our investment thesis remains clear. Many of you will recognize this slide from our CMU in September. We are pleased with our good performance during the first half, driving operations in the face of sustained inflationary pressures, all the while focusing on delivering our growth strategy for the future. And we believe we're making good progress in its delivery, and it's the correct set of choices, whatever weather lies ahead. We're a very different business now. With strength and balance in the diversity and breadth of our end markets and trade customers providing resilience in the face of short-term uncertainty. And we remain laser-focused on outperforming the market and gaining market share with evidence -- confidence in our Toolstation model continuing to drive investment in the U.K. and Europe. Our cash-generative business model and strong balance sheet provides flexibility and resilience, enabling us to reinvest in our business where we drive the greatest return for shareholders, clear examples of which I think I've mentioned this morning. And our focus on disciplined and targeted allocation of capital for growth continues to deliver long-term returns. So our investment thesis remains robust with total shareholder return in the long term, while providing resilience and flexibility in the short to medium term. And we're seeing the benefits of focusing on the delivery of our strategy, while being true to our purpose to bring to life our purpose goals of decarbonizing our industry, removing cost, carbon and complexity from our customers' business as well as our own and investing in skills to add more value to our customers. So finally, we've asked a lot of our 20,000 colleagues over the last 2 years. And it's testament to the amazing spirit of this business and the care our colleagues show for each other as well as our customers that we continue to deliver, and they continue to deliver for us even when we ask more from them and life gets tougher for them personally. I thank them all for their continued hard work and commitment, and I genuinely believe that we have the best team in the industry. And therefore, I look forward with confidence. So while the macroeconomic environment remains uncertain, the drivers remain robust, and the changes we have made over the last few years leave our businesses well positioned to outperform. So we benefit from resilient end market demand underpinned by diverse exposure across the U.K. construction from a broad trade-focused customer base and long-standing customer relationships. We benefit from a strategic and financial flexibility, a strong balance sheet, which allows flexibility in capital allocation, a simplified portfolio and an organic growth strategy based on proven concepts. And our structural growth drivers remain unchanged, a requirement to decarbonize the U.K. built environment, the need for new and affordable housing and significant planned investment in infrastructure and public sector assets. So we look forward to the future with confidence, and we remain positioned to outperform. So that concludes the presentation. Many thanks for joining us today. I'll now open up for Q&A, for which we have around 30 minutes. I'll start with the floor and then if we've got time, I will move to the phone lines.

Three, if I could, please, hopefully, quick ones. The first is just what your expectations will be for merchanting volumes in the second half, I think, comparable to the minus 2% you saw in the first half? And the second is if you could just talk a bit more about Toolstation Europe in France. And just I think you've, in the past, talked about wanting to increase format awareness, learning more about the right locations. I guess what have you learned in that last 6 months around the prospects in France? And then just more generally, when we think about investment levels across the Group is what's going on? If the market was to weaken and you would start to make changes, what are the higher and lower priority areas in that scenario?

Alan, do you want to start on the first, and I'll come back to investment levels.

So can you hear me okay?

Yes.

So on the first question, well, I think you were asking about the comp for the second half in Merchanting. I suppose it's insightful to think about the first 2 quarters because I know some people are saying, well, what's the run rate from Q2 and what does that mean? So on the comps to 2021, first of all, Q1 was by far the weakest quarter of 2021. If you recall, the market didn't really pick up until mid-March as we're coming out of some of the lockdown measures. And Q2 was by far the strongest comp in the numbers. So when I think about the H2 performance in Merchanting, I'm really thinking about the blended average of what we've seen across the first half rather than a Q2 exit rate, which is why in the statement and based on the plans we've got internally, we've made the statement for the second half that we're confident in the continuation of the strong performance that we see. Moving on to the second part of your questions on Toolstation Europe and in particular, France, what have we learned during the half? And then maybe, Nick, if you want a few comments on priorities in terms of investment for us. So in France, we've opened more branches. We've seen growth of 35%, 40% in the half, that sort of level. We have seen that the proposition is very trade-focused in terms of the customer mix that we have in France. So where we've got our best performing locations so far, they have indexed much more towards trade customers who buy more frequently and with a heavier average order value than we see in the U.K. in the French branches. They take longer to service at this stage in France. That's not about our internal efficiencies getting the stuff out there. It's much more about educating the customer on the proposition and how it works. We often have customers saying -- looking at the catalog in the front of the branch rather than using one of the laminated catalogs to fill in the form for what they want to order. And they want you to go and get the box and show them the product. So we need to keep educating the customer on the -- on how the model works. That's not a problem that it takes longer to service them at the moment because we're not as busy as our U.K. branches self-evidently because we're building the business. But it's those sorts of nuggets and insights that we've been seeing. And I'll come on to locations briefly as well that give us the confidence on why we've stepped up the investment in terms of the openings that you've seen. So that branch network, where are we performing best? It's actually in some of the smaller conurbation where we've got a branch in a 10,000 or 20,000 inhabitant location within 25 minutes' drive time, 100,000 inhabitants. Those areas tend to be poorly served by the competition, and therefore, they are open spaces for us to go and make a march. We've particularly seen that in some of the smaller towns in the [ Roanoup ] region. We've also spread a little further north into Burgundy and seeing good success and also where we've gone further south. So going forward, in terms of the locations, I don't want to reveal everything, but we're much more likely to be concentrating our efforts on the smaller conurbations where there's less competition to get the business known. So Nick, on investment priorities.

Yes. Well, as I think we mentioned a couple of times, we've got operationally much more agility in how we flex the growth and investment within our business. Strategically, again, great visibility over all the areas where we're investing for growth. And actually, that allows us to make necessary changes to how and where we're investing. And in some cases, we are -- we remain, as we talked about in September, very much in a kind of test and learn phase. So what we adopt is a very rigorous review at every stage of the benefit of the investments that we're making and how we pivot to improve or how we accelerate to grow. So visibility is much, much better and ingrained in the way that we work so that we can make those sort of choices. Where we will continue to invest is as I mentioned, really deepening our relationships and that investment in the trade proposition. So I've given some examples of that. We will also continue to invest in technology capability in our business where it drives both value for the efficiency of our business and our operations, but also for the value and ease and convenience of our customer proposition, and we've talked a lot about examples of that. We will also continue to invest in whereas the example I used with CCF, where we are finding ways to add value that is a competitive advantage for us. And you'll see from that, these are perhaps on the face of it, small areas, but they're significant in their potential. And we will continue to build the skills of our colleagues because they're absolutely critical in giving that superior trade-focused service proposition that we need. So we're absolutely in a position with full visibility. The infrastructure we use internally, particularly driven by our Group COO in front of me here, Frank Elkins, we're able to really tune the way that we invest. But actually, those are the areas that we will continue to double down because we're so pleased with the results that we're making.

Ben Wild or from Deutsche Bank. Three questions from me. Just in terms of coming back on merchanting and H2, in terms of the areas in merchanting where you have the best visibility and relatively less visibility, can you provide some color there? I know in the report, is the point is made that specialists are now 40% of the Merchanting mix. Secondly, on -- to follow up on the investments point. Are there any circumstances in which you would accelerate the freehold property program to fund additional or continuing investments in Toolstation and elsewhere? And then thirdly, just on Toolstation in June and July after the kind of peak DIY comps, any color on the growth that you're seeing there as the comp base is normalized?

Do you want to take that?

Yes. So we'll take them in order, Ben. So on where have we got the best visibility and less visibility in our specialists and in the General Merchant. I think the first comment I'd make is we are close to our customers, so we know what they're planning. Particularly for the specialist businesses, we tend to get a longer visibility. The larger the customer, the more visibility generally, you get as to what they're thinking through and what they're planning. So we know that we have customers who have won orders. We know we will be supplying those orders. It's then a question of the call off against that, that you see. Overall, everything we're hearing, particularly commercial, industrial infrastructure, new house building, the work is absolutely there. It's a question of the timing at which they can build. And some of that, you'll have heard from housebuilders as well, I'm sure comes down to planning or there is evidently some repricing going on in the background as well between the developer, the principal contractor and their subcontractors given the absolute levels of inflation. So in summary, the work is definitely there. There may be a bit more flexibility in the timing of when it's actually called off. But we know the overall order pattern is still healthy. In terms of the General Merchant, again, from the larger customers, we know that the work is there. We've seen a really good bounce back in particular as we're saying in the work we do on social infrastructure through the Managed Services business in particular. The area where you evidently get less visibility, and this is not a comment on the health of the market, take it for what it is, is as you get towards the smaller customers, the jobbing builders, and we have less visibility there. What we do have to give us confidence in that part of our mix is the trade surveys that we do and the regular contact that the sales teams have with customers. So we know they're still busy that probably unlike Q2 '21, they're probably not trying to juggle 2 or 3 jobs at the same time, but it is still difficult to find a trades person to do the work that you need to get done. So that's why we remain confident in the merchant outlook. On the second question around accelerating freehold investments that would probably be less Toolstation than the Merchanting businesses. So we do have scope. We have scope from the balance sheet. But we also have scope from the ongoing turnover in the property portfolio that we naturally generate when we're running so many sites overall. So I used the chart in previous years and at the Capital Markets Day, where you will see the inflows and outflows of cash from freehold property acquisitions and disposals over a 10-year period. It's been fully self-financing, but we have grown the market value relative to net [ book ] value of the portfolio in so doing. Those opportunities are still there. And I think over the next 24, 36 months, we will actually see greater opportunities open up, given that we've seen some of the froth coming out of the industrial property market, I think we will see greater opportunities opening up on future development sites. And we're perfectly prepared and indeed are looking at some sites within the Southeast at the moment, where we'd be prepared to buy in those sites, go through the planning process however long that takes. And to Will's question on flexibility around investment, if things -- if the economy is looking tougher, we can just pause a little on the time to plan out those sites and to execute them. We've got a few which we bought. I mentioned Cambridge for a disposal earlier. It was an example we used in September. The replacement site we actually bought in late 2017, early 2018. We will not close the Central Cambridge site, hence the deferred consideration until we fully built out that replacement site. In terms of Toolstation, I don't want to get into picking out month-by-month, but we have -- certainly, as we've come out of the peak comparator period, we've seen the numbers in the U.K. stabilize and start to move back into growth.

And Ben, I would just add that some -- just on that final point, it's not quite the question you asked, but I got a fabulous e-mail from a trade customer this morning, who had an [indiscernible] problem to solve, went to a couple of notable competitors and got absolutely no joy, went to his local Toolstation branch, all sorted in the branch, great customer service, great knowledge. Colleagues prepared to look up whatever he needed and we had it right in store. I mean, he couldn't have been more effusive. So I'd love to read it to you actually maybe. But the point is that -- my point about trade proposition, investing in trade customers investing in that proposition, we're seeing month-on-month benefit from that. And acquiring them and Simon Robinson is in the room, Retail Director for Toolstation. We're delighted by the response we're seeing from our trade customers. We've been delighted from what we've seen in the first half, and that just continues all the time.

Charlie Campbell at Liberum. A couple of questions from me, please. Going back to Toolstation Europe. Just wondering how we should think about that next year, I guess, you flagged that Holland comes back into breakeven. Should we think about the same sort of loss in France? Or does that maybe kind of narrow a bit as well? And then the second question, just going back to, I suppose, General Merchanting. You've talked quite a lot about gaining share. I just wonder if you could help us understand kind of how those share gains have happened. I mean is it more to do with the ancillary sort of Tool Hire, Managed Services? Or is it more about winning more customers? Or is it about actually gaining share with larger customers where perhaps you've been a bit underweight in the past. Just to help us understand those dynamics a bit more.

Alan, do you want to talk about Europe and France, and I'll come on to the General Merchant?

Yes. So Charlie, on Europe, I did flag that I'm fully anticipating the Netherlands to move to breakeven in Q4 of next year. So from a Benelux perspective, I do expect the losses to narrow next year. France at this stage is a bit more difficult to tell in that if we are -- if we continue to see encouragement, we might want to go faster. But at the moment, I think the best guidance I can give is probably a similar level for France to this year. And the split is probably 60-40 between France and Benelux in terms of the loss.