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Travis Perkins plc

Travis Perkins plc Reports Resilient trading and continued progress

Travis Perkins plc (LON: TPK) has provided a Q3 2019 trading update:

Highlights

  • Merchanting businesses continued to outperform in challenging market conditions
  • Excellent growth in Toolstation UK; acquisition of controlling share of Toolstation Europe
  • Strong Wickes performance across both core DIY and K&B; demerger on track for Q2 2020
  • P&H divestment paused primarily due to market uncertainty
Q3 2019 sales growthMerchanting(1)Toolstation(1)Retail(2)Group(exc. P&H)P&H(1)Group
Like-for-like sales growth1.6%15.4%9.7%4.3%3.4%
Net change in space(0.6)%5.9%(1.4)%(0.2)%(2.6)%(0.8)%
Trading days1.6%1.1%1.6%1.2%
Total sales growth2.6%21.3%8.3%5.2%(1.0)%3.8%
Two-year LFL growth5.9%25.1%1.8%6.0%14.8%7.7%
       
YTD 2019 sales growthMerchanting(1)Toolstation(1)Retail(2)Group(exc. P&H)P&H(1)Group
Like-for-like sales growth4.7%16.6%9.7%6.7%(2.7)%4.7%
Net change in space(0.7)%5.7%(1.1)%(0.3)%(3.1)%(1.1)%
Trading days
Total sales growth4.0%22.3%8.6%6.4%(5.8)%3.6%

Nick Roberts, Travis Perkins Chief Executive, commented:

“Now in my third month since taking over as CEO of the Group, I have spent a considerable amount of time in our branches, learning about our businesses and our markets from colleagues, customers and suppliers. This has confirmed my initial impressions that our businesses are well positioned to compete strongly and win greater share in their markets in the future. I am particularly impressed by the quality of our teams and their commitment to excellent customer service. The plan to simplify the Group’s portfolio of businesses remains the right one, with good progress made through the quarter towards reducing cost and complexity and enabling greater focus and more disciplined capital allocation to our advantaged trade-focused businesses.

The Group delivered a solid performance in Q3, despite trading conditions becoming incrementally more challenging through the course of the summer as a result of the on-going market uncertainty. Though the Group maintains a cautious outlook for the near-term, full year performance remains in line with our expectations.”

Business performance

Total Group sales grew by 3.8% in Q3, and by 3.4% on a like-for-like basis. There was one additional trading day in the quarter, bringing the number of trading days year-to-date in line with 2018. Across the Group, year-to-date sales price inflation has been lower than in previous years, at around 1.5%, primarily concentrated in the merchanting businesses.

Despite the wider building materials distribution market softening since mid-year, the Group’s Merchanting businesses delivered like-for-like growth of 1.6%. Travis Perkins, the general mixed merchant, showed encouraging like-for-like growth of 2% demonstrating continued market share gains, particularly in heavyside categories. The larger commercial construction market has been more challenging in the quarter, with the specialist merchants delivering modest growth, primarily driven by price inflation. Pressure on sales volume has been exacerbated by the continued supply restrictions on plasterboard materials in CCF, although the situation is steadily improving. The P&H business continues to perform well, with good like-for-like growth in higher-margin branch network sales offset by lower revenues in the wholesale business.

Toolstation continued its impressive like-for-like and total sales growth, underpinned by the continued expansion of the UK branch network to over 370 branches, and a successful further extension of trade-focused ranges which are helping to increase sales density. Further enhancements in customer proposition, such as a 5-minute click & collect service, are improving convenience for customers.

The Retail segment achieved like-for-like sales growth of 9.7%, with total sales growth of 8.3%. The strong performance of Wickes continued in Q3, with further market share gains in the Home Improvement market through core DIY categories and in the Kitchen & Bathroom showroom (K&B). Core DIY sales continue to benefit from a strong trading plan with targeted promotional activity, the success of the “online-in-store” ordering service, which is improving customer access to an extended range of products, and the continued attraction of the TradePro scheme to small trade customers. K&B sales remain robust, with increasing lead generation through digital channels, good sales conversion and increasing proportion of installation services.

Strategic progress

The process to demerge Wickes from the Travis Perkins Group is on track, both in terms of the separation of the business from the Group to increase its autonomy and the regulatory process required. The Group aims for the demerger to be completed in Q2 2020. Given the current unprecedented level of uncertainty, we have decided to pause the sale process of the Plumbing & Heating business for the time being. In the quarter, the Group acquired a controlling share of the Toolstation Europe business which will enable the Group to accelerate investments to expand the Toolstation network in Europe in the coming years.

The Group remains on target to achieve its planned cost reductions in 2019, with actions identified or already underway to achieve £20m to £30m of annualised savings by mid-2020 which will reduce complexity, lower the above-branch cost base and speed up decision making, and improve service levels for customers.