Builders merchant group Travis Perkins are to begin cost cutting measures to reduce costs by £65m across their builders, plumbing and heating, joinery merchant and retailing operations. The builders merchants also intend to cut capital expenditure, and will probably not pay a final dividend to shareholders, an interim statement released today reveals.
The statement, for the nine months to September 30 showed group turnover up 3.3% compared with the same period in 2007, although trading has fallen off in recent weeks on both trade and retail sides
Total turnover in the merchanting division rose 3.1% and, although like-for-like turnover per trading day for the period was down by 1.2%, like-for-like sales in both September and early October has deteriorated sharply to minus 10%. In the general merchanting arm, again total turnover rose (by 2.1%) as like-for-like turnover per trading day fell (by 1.1%.) In the specialist merchanting business total turnover was up by 4.9% and like-for-like turnover per trading day down by 1.4%.
Wickes also continues to gain like-for-like market share. Total turnover for the 39 week trading period ended on September 27 was up 1.2%. For this period, like-for-like sales per trading day were down by 2.6% with core products down by 2.6% and showroom sales lower by 2.5%.
Since the end of 2007 Travis Perkins have added a net 82 new branches to the merchanting network and eight new Wickes stores representing retail space growth of 4.0%. They now trade from 1,241 locations including 26 branches operated by Toolstation.
The company stated: “Despite more challenging conditions, our merchanting division continues to gain market share on a like-for-like basis. Product cost inflation has remained high and our gross margins have held up well despite lower market volume available.
“We are now taking further action to prepare the Group in advance of the expected steeper decline in activity. These actions include a reduction in operating costs and measures aimed at further reducing debt.
“We will now implement, before the end of 2008, actions aimed at reducing costs by at least £65 million. This means, after absorbing overhead cost inflation and the full year effect of network expansion of £35 million, costs are expected to show a net £30 million reduction in 2009 from 2008.
“We have cut our plans for capital expenditure and now expect to spend less than £140 million this year (of which £102 million was spent in the first half). Our net capital expenditure for 2009, after disposal receipts, will not exceed £50 million. To accelerate the reduction of debt, the board believes it is unlikely to recommend a final dividend for the current year.”
Editor’s blog, click here