Travis Perkins sees recovery take hold

Builders and plumbers merchant group Travis Perkins saw revenue grow by 1.6% for the six months ended June 30 2013.

In the final two months of the period, revenue grew by 7%, 6.1% on a like-for-like basis.

Adjusted profit before tax was £136.1m, a rise of 4.1% on the same period a year ago.

Geoff Cooper, Chief Executive, said: “We anticipated a poor first quarter, however this was exacerbated by the early and cold weather and Easter. Lead indicators for the remainder of this year, and for 2014, are strengthening, with new housing leading the way.

“All four divisions are making progress with an improving trend in all markets and are flexibly managing volume, gross margin and costs so as to optimise returns.

“With our management teams’ proven ability to select and execute trading tactics matched to market conditions, we are confident of further sales growth and improving returns. Our increasing confidence in this is reflected in the 25% increase in the interim dividend payable in November.”

The General Merchanting division saw revenue grow by 3.9%, to £754.2m with a material step up in revenues from the 0.3% increase in the first four months of 2013 to 10.8% growth for the rest of the half.

Market wide deflation, stronger relative growth from lower margin major house building customers and category mix effects more than offset the growth in higher margin tool-hire revenue and resulted in a 110bps fall in gross margin.

The division expects gross margin for 2013 as a whole will be lower than 2012. Whilst operational gearing on rising volumes means operating margin is expected to improve through the balance of the year, operating margin for the year as a whole is expected to be slightly lower than 2012.

Despite poor weather in the first four months of the year, revenue for the Specialist Merchanting division grew by 8.0% to £316m with the division benefiting from the administration competitor WT Burdens in 2012.

The division continues to provide valuable opportunities for the General Merchanting and Consumer divisions to grow sales to their respective customers by making ranges of specialist products available through internal supply. Overall, before property profits, the division has improved profits by 3.5% in the first half and steady progress was made in keeping the business’ operations safe through improved training and colleague engagement initiatives.

Keyline saw further growth in rail sector sales and sales to the utilities sector also progressed well and the business created further specialisation opportunities in geo-technical products. Activity levels in new housing resulted in increased sales to specialist sub contractors.

Benchmarx delivered good like-for-like revenue growth, slightly outperforming the market leader during the first four months in the first half and benefited strongly from operational gearing as the business controlled costs whilst continuing to mature its sales profile in branches.

CCF’s like-for-like sales growth was modest in the first four months of the year as construction projects were delayed due to weather and to margin protection actions taken in the business. A new branch was opened at Belvedere in July in order to build CCF’s presence in the South East.

Revenue in Wickes declined in the first half as a result of the poor weather during the first four months of the year. In May and June improving consumer confidence and better weather has reversed the revenue decline with revenue for the last eight weeks of the period being 8.6% higher than 2012. The like-for-like estate increased market share in the first four months of the year owing to the benefits of a strong kitchen and bathroom performance and the beneficial effect of the introduction of trade requested brands.

Toolstation revenue and profits both increased through a combination of like-for-like growth, which saw it significantly outperform its main competitor over the thirteen weeks to the start of May and continued network expansion.

During the period Toolstation expanded its number of stores by 11, and by 30 June it operated out of 134 stores in the UK. The first four Toolstation implants opened within existing Wickes sites and are making strong progress.

The plumbing & heating division saw revenues fall slightly to £791.9m, due to subdued demand with pricing pressures continuing with resistance from installers to manufacturer price increases.

PTS’ like-for-like volumes and revenues were lower than last year as the business concentrated on exiting low margin business and experienced a slow start to social housing contract sales in the half.

BSS Industrial performed well in a tight market where projects have been delayed. Despite intense price competition BSS gross margins improved owing to better sourcing arrangements.

City Plumbing Supplies experienced modest like-for-like growth, however improvements in mix resulted in a strong gross margin performance. The new bathroom concept, now operating from 58 locations, continued to deliver strong growth in a very depressed market.