Travis Perkins plc’s management team has hosted its capital markets update in London, where the decision was made to explore the potential sale of its Plumbing & Heating division.
Travis Perkins has said the aim of this is to facilitate more focused management attention and capital deployment on the higher returning areas of the business, and create further opportunities to simplify the Group and reduce costs.
It also announced that in the short term, management will focus on strengthening the performance of Wickes and capitalising on its competitive advantages in the DIY, small trade and Kitchen & Bathroom markets. As it is a predominantly consumer focused business, the Board will also look to review the options for maximising the value of Wickes in the medium term.
The long-term growth drivers of the business reportedly remain robust, with a continued shortage of housing in the UK and underinvestment in the maintenance and improvement of the existing, ageing, housing stock.
In the shorter term, market conditions are said to remain uncertain, impacting secondary housing market transactions and consumer confidence.
Following a comprehensive review, the Board has concluded that the Group will focus on serving trade customers through advantaged businesses in attractive markets, and will simplify the Group to reduce complexity and cost to drive returns.
Travis Perkins Group has said its heritage is founded in serving its UK trade customers and this will continue to be the aim of the Group’s activity going forward. It is hoped that generalist and specialist merchants will continue to see the largest share of industry growth with returns remaining resilient over time.
The Group will also aim to deliver sales growth through market outperformance, building on the momentum in the Contract Merchanting businesses, the continuing strong growth in Toolstation, and a reinvigoration of its General Merchanting business.
The General Merchanting division is reported as one of the main drivers of profitability and cash flow within the Group, and the management team has a clear plan to improve returns through a rebalancing of decision making and an increase in local empowerment of the branch manager and sales teams.
John Carter, CEO, commented: “We have developed a clear plan to focus on delivering best-in-class service to our trade customers, and to simplify the Group to reduce complexity, speed up decision making and reduce costs. Our trade businesses hold strong positions in attractive markets, and these initiatives will enable us to concentrate our management time and capital in the highest returning areas.
“Our strong balance sheet and free cash flow generation, driven by growing earnings and lower capital expenditure, will underpin our commitment to drive shareholder value and a progressive dividend.”