TP plc Q3 2019 trading update

TP plc Q3 2019 trading update

Travis Perkins plc has announced its Q3 2019 trading update, citing “resilient trading and continued progress in uncertain market conditions”.

The company declared that its merchanting businesses “continued to outperform in challenging market conditions” and noted “excellent growth in Toolstation UK”. The Group revealed a strong performance for Wickes across both the core DIY category and Kitchens & Bathrooms, but that the demerger from the group remains “on track for Q2 2020”.

The planned divestment of TP’s Plumbing & Heating division has, however, been paused “primarily due to market uncertainty”.

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, the report noted that year-to-date sales price inflation has been lower than in previous years, at around 1.5%, and was “primarily concentrated in the merchanting businesses”.

It continued: “Despite the wider building materials distribution market softening since mid-year, the Group’s Merchanting businesses delivered like-for-like growth of 1.6%” with the Travis Perkins brand showed “encouraging like-for-like growth of 2% demonstrating continued market share gains, particularly in heavyside categories”.

The report went on: “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.”

Travis Perkins’ 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”. Meanwhile, 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”.

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 reported in the Home Improvement market through core DIY categories and in the Kitchen & Bathroom showroom (K&B). K&B sales are said to “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 described as “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.

The report concluded by stating: “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 customer.”

Nick Roberts, Chief Executive, commented: “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.”

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