|Adjusted operating profit
|Adjusted operating profit excluding property and one-offs
|Adjusted operating margin
General Merchanting revenue increased by 5.2%, 3.9% on a like-for-like basis, demonstrating continued outperformance compared to the market. Growth was particularly strong in heavyside materials, supported by the heavyside range centre network, and Tool Hire. Growth in heavyside categories has led to an increase in the proportion delivered sales (53.4% versus 51.8% in 2014). Sales growth slowed considerably in the second half of the year as the RMI market slowed owing to fewer secondary housing transactions in late 2014 and early 2015.
Despite the strong start to the fourth quarter in October, the expected pick-up in volumes occurred in January and February 2016, rather than as anticipated in November and December 2015. The growth in nine month lagged housing transactions provides increased confidence that the market growth is likely to be sustained through the first half of 2016.
Adjusted operating profits, excluding property profits, grew by 7.7% to £182m. Gross margins improved by 10 bps in 2015. An improvement in gross margins in the first half, driven by improved sourcing, and better management of cost price inflation pass through was offset in the second half of the year by increased competitive pricing in the weaker market. The operating cost base of the business was controlled carefully across the year, with additional cost invested in the range centre network, new store formats and customer service offset by improvements in efficiency.
Property profits were £3m higher in 2015 at £17m (2014: £14m), with the majority of these profits recognised towards the end of the year, from the disposal of 12 Travis Perkins sites, as part of the wide sale and leaseback transaction.
Lease adjusted return on capital employed was flat at 16% compared with 2014, with growth in operating profits broadly offset by the increase in capital employed following the investments made in new branch openings, the distribution network, store formats, and the growth in net working capital as credit sales grew. These investments are expected to drive improvements to shareholder returns in 2016 and beyond.
Twelve new Travis Perkins branches were opened or re-sited in 2015, either entering under-served catchments, or moving existing businesses to alternative sites to locate them more conveniently for customers and optimise operations.
The benefits of supplying an extended heavyside product range more quickly to customers through the heavyside range centre network were evidenced by the growth in heavyside categories. In July 2015 the Tilbury range centre was opened to cover branches in London and the South East, and combined with the range centres in Warrington and Cardiff, service two thirds of Travis Perkins branches with next day and day-plus-one deliveries.
The heavyside range centres are also able to support the growing Tool Hire proposition. Assets can be held centrally, and supplied to branches next-day or as required by customers. This extends the number of branches able to offer tool hire, where previously only branches large enough to stock a credible range of hire assets could provide this additional service. Any branch now served by a range centre can offer a broad tool hire solution to customers driving superior profit density for existing branches and efficient returns on highly utilised hire assets. The range centres improve tool hire operational efficiency, as less equipment is required to cover the network, asset utilisation is increased, and maintenance activity is centralised requiring fewer resources in-branch.
The programme to modernise Travis Perkins branch formats continued, with twenty branches now operating with the new shop and yard layouts. Initial signs from these branches are encouraging with strong sales growth and positive customer feedback.
Benchmarx continues to grow through a combination of organic growth, and network expansion. New branches were opened in 38 sites across the UK, including 26 standalone showrooms and 12 implants within Travis Perkins branches.
Benchmarx continues to outperform the market, increasing its market share in trade kitchens and building relationships directly with end-users on behalf of the business’s trade customers. In 2015 the Benchmarx product range was refreshed, reducing the number of SKUs and complexity. This allowed greater operational efficiency and improved the on-time in-full delivery to customers, and provides the business with a strong platform for further growth.