Travis Perkins H1 2018: Solid growth for merchanting, but challenging DIY market hits Wickes

Travis Perkins - owner of over 20 UK businesses including Toolstation, Wickes and Keyline - saw solid revenue growth of 4.4%, with like-for-like growth of 4.2% in the first half of 2018.

Travis Perkins' trade-focused businesses in general merchanting put in a good trading performance. However, the UK's challenging DIY market hit both sales and profitability for Wickes. "Significant" cost reduction plans are underway, the group said, with the benefits to be felt in H2 2018.

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

“Our trade focused businesses in General Merchanting, Contracts, Toolstation and Plumbing & Heating achieved good sales growth despite experiencing a volatile first half," said CEO John Carter. "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.”

Weather affects trading

March and April's inclement weather restricted growth across the board. While Toolstation and other brands recovered strongly afterwards (sales growth 10.7% like-for-like), Wickes did not see such an upturn (sales decline 7.7% like-for-like). Wickes gross margin was further hit by cost inflation and pressure to keep prices low in the competitive DIY market.

Toolstation opened 22 new stores in H1 2018, taking the total network to 317. Construction of a third distribution centre, increasing capacity to support 500 stores, hit profits as expected, but will benefit future sales and growth. Toolstation Europe continued in the Netherlands and France, "with encouraging sales results".