Covering the three months to 30 September 2023, Travis Perkins plc’s Q3 2023 trading update outlines the sector’s continuing “challenging market conditions”.
With “significant commodity product deflation impacting on margins”, the Travis Perkins Group has continued to experience challenging market conditions with the “pronounced slowdown in new build housing and domestic RMI activity persisting into the third quarter.” As a result, Group revenue declined by (1.8)% in the period with like-for-like sales also down (1.8)%.
Whilst the report notes that third quarter trading started as expected in the Merchanting segment, “September saw a notable deterioration in market activity and sentiment.” Q3 revenue was (3.4)% lower year-on-year, which showed “a modest improvement on the first half”, however the drivers of revenue have “shifted markedly.”
Pricing declined by (3.1)%, resulting primarily from strong deflationary pressures on commodity products which have significantly impacted on gross profit and margins, including the impact of selling through existing stocks at lower market prices.
All of the Group’s merchant businesses “have been focused on driving volume by delivering great service and competitive prices for customers.” This, the report states, has resulted in a positive response from customers and, as a consequence, volume performance improved to flat year-on-year in the quarter.
TP’s Toolstation business “continues to see good growth across both the UK and Europe, benefitting from network maturity.” Toolstation UK, meanwhile, delivered revenue growth of 7% in the third quarter whilst Toolstation Europe saw revenue growth of 9%.
Overall, the update shows that whilst “overhead inflation remains elevated, the Group remains focused on actions to minimise the impact on profitability.” Working capital and capital expenditure continue to be tightly managed to reflect near term market conditions.
Outlook
The Q3 update states: “The Group’s businesses will continue to focus on meeting customers’ needs on pricing and service in order to be well positioned when market conditions improve. With commodity deflation expected to continue and the exit rate from the third quarter indicating further challenging conditions for the balance of the year, the Group now expects to deliver an adjusted operating profit in the range of £175m to £195m for the full year.”
Nick Roberts, Chief Executive, commented: “Market conditions remain challenging with continued weakness across new build housing and domestic RMI. Deflation on commodity products has also been greater than we had anticipated. In this environment, our priority has been to ensure that we deliver for our customers, both on service and pricing, as we seek to retain and grow our customer base for the medium to long term.
“This is the right approach, demonstrated by our ability to maintain volumes in this difficult market. However, this has impacted on our trading margins and is reflected in today’s revised guidance.
Nick added: “With a strong balance sheet and leading customer propositions, we remain confident in our future prospects and work continues to position the Group to benefit from the long-term structural drivers across our end markets, particularly with the need to decarbonise the built environment and to build more homes in the UK becoming ever more pressing.”
| Q3 2023 | Merchanting | Toolstation | Group |
| Volume | (0.3)% | 2.5% | 0.0% |
| Price and mix | (3.1)% | 4.8% | (1.8)% |
| Total revenue growth* | (3.4)% | 7.3% | (1.8)% |
| Like-for-like revenue growth | (2.9)% | 4.4% | (1.8)% |
| YTD 2023 | Merchanting | Toolstation | Group |
| Volume* | (6.4)% | 2.6% | (5.3)% |
| Price and mix | 2.4% | 6.0% | 3.1% |
| Total revenue growth* | (4.0)% | 8.6% | (2.2)% |
| Like-for-like revenue growth | (4.1)% | 5.0% | (2.7)% |
* Trading day adjusted
