Exceptional £235 million charge hits Travis Perkins profits

Travis Perkins Group saw revenues rise 4.6% in 2016, with adjusted operating profit reaching £392m, up £3m on 2015.

However, an exceptional charge of £235m in the plumbing & heating and tile businesses impacted on Group profits. Profit before tax fell to £73m in 2016, £151m lower than 2015 (2015: £224m).

Other exceptional charges in the period included £57m to cover the previously announced closure of underperforming branches.

The Group’s consumer division – including Wickes and Toolstation – saw revenue growth of 9.5%, up 6.4% on a like-for-like basis. Those gains included market share wins, according to the group.

General Merchanting – Travis Perkins

  • General Merchanting adjusted operating profits increased by £8m to £207m in 2016 (2015: £199m). There was a £3m reduction in property profits to £14m (2015: £17m). Operating profit grew by 6% to £193m (2015: £182)
  • The branch format modernisation programme continued, with 52 of the new branch formats now functional with the new shop and yard layouts. Initial sales and feedback have been encouraging.
  • New branch concept has been trialled at Staples Corner in London with a new counter format, significantly extended lightside ranges, a new pricing structure, a new layout and extended seven-day opening hours.
  • Further progress was made on improving the multi-channel proposition for Travis Perkins, with a transactional website now offering a two-hour click-and-collect service, launched nationwide on 19,000 locally stocked SKUs.
  • Stock – TP has revised its inventory control to allow for more efficient stock holding across the network. Therefore the Group inventory being held was broadly flat despite the growth in sales: “Further work was carried out to ensure that the right ranges are available in branch with extended ranges held upstream alongside direct to customer deliveries managed through suppliers.”
  • In 2016, thirteen former Keyline branches were rebranded as Travis Perkins. Travis Perkins opened six new branches, relocated seven to more suitable sites and closed 14 underperforming branches and the Group’s timber supply centre at Ferndown. 18 new Benchmarx branches were opened in 2016, including five as implants in existing Travis Perkins sites or located as part of a Travis Perkins trade park.

Wickes & Toolstation highlights

  • Adjusted operating profits increased £6m to £101m (2015: £95m). Adjusted operating profits increased 8.6%.
  • The new Wickes store formats continued to roll out, offering “a simpler shopping experience with access to improved ranges”. The new format is also enabling Wickes trade customers a faster way to buy their products and get back to work, the group said. A further 46 new Wickes store formats were opened in 2016, bringing the total number of new format stores to 62. The programme will continue in 2017.
  • The Wickes distribution centre network was rationalised, reducing to a single centre in Northampton which now serves all store and direct to customer deliveries.
  • Wickes continued to invest in their value propositions in order to maintain market leading prices and drive continued growth in market share. The business undertook further range review activity in 2016 in tandem with the further development of its new store format with particular success in bricks and blocks and garden maintenance.
  • The online proposition in Wickes continues to evolve, with nationwide click & collect within 1 hour, one hour time slots for home deliveries and same day delivery on up to 7,000 products. Initial customer feedback has been very positive, and Wickes has achieved over £100m of online sales in 2016 for the first time.
  • Expansion of the Toolstation network continued in 2016, with a further 36 stores opened in the UK, and seven shops opened in the Netherlands. Online only ranges were introduced for the first time with over 1,000 products available to customers along with improved marketing campaigns. Click and Collect order availability was improved to within 20 minutes with many orders available almost instantaneously. Further online range extension is planned in 2017 and the store opening programme will accelerate further in the Netherlands.

CEO John Carter said: “2016 was another solid year for the Group, with continued strong performances from the Consumer, Contracts and General Merchanting divisions, which together contributed 90% of Group adjusted operating profit. These businesses continued to benefit from the investments made in the branch network and customer propositions over the last three years, which provides a strong base for future growth.

“It was a much more difficult year for the Plumbing & Heating division driven by structural challenges for traditional merchant businesses in this segment. Whilst the network restructuring work carried out in 2014 and 2015 created a more focused branch network, further work is required and over the next six months we will be exploring all routes to enhance returns. There are improvements we can make to the ranges we offer to our customers, our availability, our online presence and our service proposition.

“The macro-economic outlook of the UK is mixed. The sharp decline in the value of Sterling since June 2016 has created cost pressures on imported goods and materials, and the expectations for secondary housing market transactions and growth in the RMI market have weakened. We have a proven track record of managing our cost base and took decisive action in October 2016, announcing a restructuring programme to close underperforming branches and improve supply chain efficiency. We enter 2017 with a strong balance sheet and will continue to invest selectively in our leading businesses to further strengthen our competitive advantages which will enable us to continue to outperform and drive shareholder value over the medium term.”

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