19th Oct 2016 08:03
LONDON (Alliance News) - Shares in Travis Perkins PLC were trading down 6.6% at 1,390.00 pence on Wednesday morning, after it announced plans to close over 30 branches, putting 600 jobs at risk, and warned on full year earnings.
The FTSE 100-listed builders' merchant, which owns chains such as Wickes, BSS, Toolstation and Tile Giant, cited uncertainty over UK customer demand as the reason for the restructuring, which also includes the closure of ten smaller distribution and fabrication centres. Some IT legacy equipment also is expected to be written off.
The 600 employees affected by the restructuring activities have been notified, Travis Perkins said.
Travis Perkins said that, as a result of the closures, it will incur exceptional charges of between GBP40.0 million and GBP50.0 million in 2016, around two thirds of which will be non-cash write-offs. The cash cost of the restructuring is expected to be recovered by the efficiencies generated within 18 months, Travis Perkins added.
"It is still too early to predict customer demand in 2017 with certainty, and we will continue to monitor our lead indicators closely," Chief Executive John Carter said.
This follows a similar announcement from rival plumbing & heating supplier Wolseley PLC in September of plans to slash 800 jobs and close 80 branches in the UK, citing subdued demand and competitive trading conditions in the region.
Shares in Wolseley were down 0.9% at 4,480.00p on Wednesday.
Travis Perkins' decision came as it said that, for the three months ended September, its sales grew 3.4% year-on-year, and 2.0% on a like-for-like basis.
Travis Perkins reported 3.8% annual sales growth in General Merchanting, or 0.6% on a like-for-like basis, thanks to the 11 new Benchmarx and Travis Perkins branches opened earlier in the year. Travis Perkins said that, despite the volatility in demand seen during July and softer market conditions in August and September, its margin was "well managed".
Meanwhile, Consumer sales grew 9.1% or 6.3% on a like-for-like basis, with both Wickes and Toolstation materially outperforming the market.
Travis also reported sales growth within in its Contracts division, of 4.0%, or 5.7% on a like-for-like basis, with the like-for-like sales performance stronger due to the effect of transferring 13 Keyline branches to Travis Perkins in the first quarter of 2016.
However, the company said sales within its Plumbing & Heating division declined 3.9% in the third quarter or 4.1% on a like-for-like basis.
Travis Perkins said the combination of weak demand, changing customer buying behaviour, and the impact of previous government boiler replacement incentive schemes had meant the plumbing, heating and bathroom markets had "been challenging".
The operations of the Plumbing & Heating division will be fully reviewed and the outcome of the review and any associated costs will be communicated in 2017, Travis Perkins said.
In light of this, Travis Perkins said it expects its adjusted earnings before interest, tax and amortisation for 2016 to be "slightly below current market consensus" of around GBP415.0 million. For the prior financial year, Travis Perkins generated an adjusted earnings before interest, tax, depreciation and amortisation of GBP413.0 million.
"Our Plumbing & Heating results were disappointing and whilst market conditions have worsened, we are not satisfied with our performance and will commence reviewing these operations. Our operational focus remains on improving all of our customer propositions, optimising our networks, intensifying our use of space and exploiting the scale advantage we have created," said Chief Executive John Carter.
By Hannah Boland; [email protected]; @Hannaheboland
Copyright 2016 Alliance News Limited. All Rights Reserved.
Related Shares:
Travis Perkins