Wickes, Tile Giant and Toolstation post strong LFL sales

Travis Perkins' Consumer Division which includes Wickes, Tile Giant and Toolstation has posted an 8.8% rise in revenue to £1,283m during the year ended 31st December 2014.

Consumer Division highlights:

• Revenue up 8.8% to £1,283m with consistent like-for-like sales growth throughout the year and a very strong fourth quarter against a strong prior year comparator
• LFL growth 6.7%
• Adjusted operating profit up 22.7% to £77m from £63m in 2013, adjusted operating margin up 0.7% to 6.0% and improved LAROCE to 7%
• Although early in the transformation programme for Wickes, customer feedback to the changes implemented so far has been positive. Improvements to value, branded ranges, promotions, customer service and the introduction of a new website and click and collect capability demonstrate the extent of the work underway

The Division showed strong revenue growth throughout 2014. Like-for-like sales growth was consistently over 6% throughout the year.

The first quarter benefitted from milder weather than in 2013, coupled with strong winds which assisted fencing and roofing sales. The fourth quarter saw the strongest underlying sales growth with like-for-like sales up over 6% and two-year growth of over 15%. Total revenue growth of 8.8% and like-for-like sales of 6.7% demonstrates the improvements made in the Wickes offer through the year and the attractiveness of the Toolstation proposition.

Continued price investment in Wickes, to keep prices generally lower than its competitors, helped the business gain significant market share and re-establish a stronger price perception amongst customers. Toolstation continued to invest to maintain its ‘lowest price in the market’ positioning.

Despite these significant investments for customers gross margin declined by only 0.3ppt owing to the continued work to re-source and rationalise range. However, the growth in volumes and strong cost control resulted in operating margins improving from 5.3% to 6.0% and EBITA growing by nearly 23%.

New stores contributed 2.1ppt to sales during the year with four new Wickes stores opened alongside 33 new Toolstation shops. At the end of 2014 Toolstation operated from 184 shops and Wickes from 232 stores. The transformation plans for Wickes started to gain momentum during 2014 with improvements in price, branded ranges, promotions, customer service and Wickes online offer through the introduction of a new website and click and collect. Further improvements and investments are planned in 2015 alongside an acceleration in the store opening programme.

To date the incremental returns from these investments have been strong and are contributing towards management’s medium-term target of improving lease adjusted returns by 200-300bps for the Division as a whole. Wickes plans to continue the expansion of its network by between 5 and 10 new stores per year and Toolstation is planning to open more than 30 shops again in 2015 (2014: 33).

With clear improvement and expansion plans in place for 2015, a strong performance in 2014 and positive market indicators, management are encouraged with the improved outlook for the Division.

John Carter, Chief Executive, commented: “Whilst it is still relatively early in the recovery of the UK construction industry, the new housing market, new commercial and industrial markets and the repair, maintenance and improvement market (“RMI”) have been performing largely as we expected. As we expected the key lead indicators have settled into a still positive, but more moderated and consistent trend. This backdrop allied to our “self-help” growth initiatives should support on-going market share gains, medium-term double digit operating profit growth and continuing growth in return on capital. We have seen encouraging progress in the majority of our businesses during the first year of implementing the Group’s updated strategy. Our key priorities remain on modernising General Merchanting, transforming Wickes and reconfiguring our plumbing and heating businesses to better suit their customers’ needs. Structural advantages in sourcing and supply chain allied to superior ranges, availability and value propositions should enable the Group to sustain market outperformance and give us confidence in the Group’s prospects for the foreseeable future.”

Source : Insight DIY