Travis Perkins Q3 – some good some bad

Builders’ merchant and DIY chain Travis Perkins has announced it is to close 10 of its smaller distribution and fabrication centres as part of a strategic plan to optimise its network in the face of uncertain future demand.

The rationalisation programme also includes the closure of 30 branches and may involve the loss of up to 600 jobs.

For Q3 of the financial year, Travis Perkins has said it is going to incur exceptional charges of between £40 million and £50 million of which 60% will be non-cash write-offs.

“The cash cost of the restructuring is expected to be recovered by the efficiencies generated within 18 months and provide on-going benefits to the group thereafter.”

Sales for the whole Group for the first nine months were 4.9% up on the same period in 2015. The consumer side of the business did very well, with a 6.4% like for like growth. However the plumbing and heating division saw like for like sales growth of 1.1%.

In September, plumbing and heating company Wolseley also outlined plans to prune its UK network in a £100 million “UK turnaround and repositioning” plan.

Travis Perkins chief executive John Carter said: “General Merchanting delivered a solid result in the third quarter alongside very strong performances in our Consumer and Contracts businesses where we materially outperformed our markets.

“Our Plumbing & Heating results were disappointing and while market conditions have worsened, we are not satisfied with our performance and will commence reviewing these operations.

“Our operational focus remains on improving all of our customer propositions, optimising our networks, intensifying our use of space and exploiting the scale advantage we have created.

“We expect this focus to underpin our outturn for 2016, albeit with Adjusted EBITA slightly below current market consensus of around £415 million”.

Travis Perkins is in the second phase of its five year plan that was first announced in 2013. This involves “selective investments to create and extend structural advantages over the medium to longer term”.

The Travis Perkins statement said that the new Wickes store format has been delivering strong improvements in sales and returns, with 12 Wickes stores refitted in Q3, bringing the total number of stores operating in this new format to 50.

“The multichannel experience has been improved in Wickes with delivery slot of choice now launched and the trial of deliveries within an hour underway. Toolstation has reduced the lead time on Click & Collect and Travis Perkins has launched 2 hour Click & Collect nationwide. Further investments in value, as well as range enhancement and extension in Wickes, Toolstation, Benchmarx and Travis Perkins are delivering both a better customer experience and improved returns for shareholders.

The Travis Perkins Group wants to continue to expanding its network, principally in Wickes, Travis Perkins, Toolstation, CCF and Benchmarx, as well as through trade parks where a number of businesses can co-locate.
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