Travis Perkins blames weaker DIY market for lower profits

Earlier this morning Travis Perkins updated investors with their latest interim results for the six month period ending 30th June 2018. Once again, they've chosen to blame a 'challenging UK DIY market' for a weaker overall performance, with Wickes sales and profitability negatively impacted.

Here's the all important summary:-

Highlights

• Solid revenue growth of 4.4% with like-for-like growth of 4.2%.
• Good trading performance in the trade focused businesses in General Merchanting, Plumbing & Heating, Contracts and Toolstation.
• Challenging UK DIY market negatively impacting sales and profitability in Wickes, with significant cost reduction plans underway.
• Cost reduction plans in progress across the Group with benefits weighted towards H2 2018.
• Adjusted operating profits decline of 5.8% primarily reflects sales mix, with weaker Kitchen and Bathroom showroom sales in Wickes, and higher operating costs in General Merchanting.
• Adjusting items include an impairment of £246m against the goodwill in Wickes given the challenging DIY market, and reorganisation costs in the P&H and Wickes businesses.
• Interim dividend unchanged at 15.5p per share.
• Strong focus on costs given mixed market outlook, with 2018 Group EBITA anticipated to be in the lower half of the range of analyst expectations.

John Carter – Chief Executive Officer said:

“Our trade focused businesses in General Merchanting, Contracts, Toolstation and Plumbing & Heating achieved good sales growth despite experiencing a volatile first half. These businesses exited the period with encouraging momentum and, supported by a continued focus on cost, they remain on track to deliver modest profit growth for the full year.

Our consumer-focused business, Wickes, has had a far more challenging period as weaker consumer spending trends, combined with a difficult competitive environment, have held back profitability. Consequently, the Wickes team is executing a significant cost reduction programme. Whilst these savings will help drive improved profitability through the second half of the year, Wickes’ profits will be lower than previously expected.

Against a backdrop of changing market conditions which are expected to continue for the foreseeable future, the Group has commenced a comprehensive review of its business, with a view to driving stronger performance and enhanced value for shareholders in the medium term.” 

Insight DIY Analysis & Commentary - Steve Collinge

It's fascinating that TP are once again blaming a tough UK DIY market for the Wickes performance, when in reality, the Kingfisher Q2 results due in August are likely to state the opposite. The reality is that with much weaker seasonal ranges and an almost non-existent garden offer, Wickes have not been able to benefit from significant uplift in sales generated by the long run of good weather. On the contrary, consumers have chosen to flock to the retailers with large garden ranges and at the same time have purchased a broader range of home improvement products.

The 'Comprehensive review of the business' comment from John Carter is particularly interesting as we believe this relates to the potential sell-off of the Wickes business - watch this space....

Source: Insight DIY Team & Travis Perkins media release.

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