Builders merchant group Travis Perkins plc saw revenue grow 3.5% to £6,433m for the 12 months ending December 31 2017.
However, the merchant’s year-end results, released this morning (February 28), also show adjusted operating profit down by £29m (7.1%), due to a combination of facors: higher operating costs in the General Merchanting and Consumer divisions and an anticipated full-year profit decline in Plumbing & Heating as well as significantly higher central costs driven by the investments in IT capabilities and digital platforms, and the cost of new format experiments.
John Carter – Chief Executive Officer said: “2017 was a challenging year for the Group, with continuing uncertainty in our end-markets, and declining consumer confidence throughout the year. The main focus for our businesses has been to recover the significant cost price inflation encountered and on the whole, this has been achieved successfully. Despite the challenging environment, we have continued to make disciplined investments in our customer proposition for the long term. Both the General Merchanting and Consumer divisions were held back by this investment in a higher cost base which ran ahead of volume growth. The Contracts division delivered another excellent performance, with strong revenue growth generating good operating leverage. Progress in Plumbing & Heating following the announcement of the transformation plan has been swift and very encouraging. The business has been simplified under a single branch network, reducing costs and improving the proposition which has driven higher revenues and a return to profit growth in the second half of the year. In 2018, we anticipate that the mixed market backdrop will continue. As a result, we will be focusing capital investment behind our key priorities, and slowing investments elsewhere. The Group will focus heavily on maintaining tight control of the cost base and expects 2018 performance to be similar to 2017.”
The general merchanting division increased sales by 1.7% to £2,109m and added 17 branches in an increasingly challenging market. The roll-out of the new pricing framework was completed across the Travis Perkins branch network. The framework allows branch staff to provide more competitive pricing to customers on a much more consistent basis. Price changes are being applied by product category or family through the course of 2017 and 2018. ? The Travis Perkins transactional website continues to grow strongly, with over £17m of online sales in 2017.
In plumbing and heating, the 0.5% increase in revenue to £1,366m represented a turnaround on recent years. In the second half, sales grew by 2.5% through strong performances in the combined branch network, online channels and the FPC wholesale business. Like-for-like sales growth was 6.1% in Q4. Operating profits, excluding property, grew in the second half of the year by over 8%. Gross margins fell slightly, with gross profit broadly stable, mainly owing to a change in the mix of business, with strong growth in lower margin wholesale business, as well as stronger promotional activity in the branch network to drive volume growth.
In contrast, the Contracts division’s revenue growth of 8.1% to £1,369m was strong across all three businesses in the division. growth was driven by both strong price inflation and volume growth as the commercial construction, residential new build and infrastructure markets remained resilient and CCF, Keyline and BSS all increased market share through the year. In particular, Keyline achieved strong like-for-like sales growth throughout 2017, gaining market share gains as it continued to focus on a specialised heavy civils and drainage product range to a specific customer base. The roll out of the lowcost Keyline branch format continued, with the third trial branch opened in Telford.
In the Conumer division, total sales growth was 4.7%,with sales of £1,589m, driven by Wickes in the first half and by Toolstation sales growing to over £300m in 2017. Having said that, Wickes’ like-for-like sales growth slowed through the course of 2017 as the UK DIY market became increasingly challenging and the business had a disappointing autumn Kitchen & Bathroom (K&B) showroom promotional period.
The full Final Results presentation is here