Trading update

RNS Number : 9620F

Travis Perkins PLC

16 October 2008

 



Travis Perkins PLC

16 October 2008

TRAVIS PERKINS PLC

('Travis Perkins', or 'the Company')

Trading update

Travis Perkins, the leading UK builders' merchant, today issues this Interim Management Statement for the period since 30 June 2008.

In total, Group turnover for the nine months to the end of September is up 3.3% compared to the equivalent period in 2007. However, in recent weeks, trading has been below earlier expectations with both the merchanting and retailing businesses experiencing more difficult conditions as sentiment in construction markets has reacted to the extraordinary turmoil in financial markets. This, together with continuing negative trends in leading indicators, leads us now to expect a more rapid decline in market activity, although our view of the scale of the likely downturn has not materially changed.

We now expect profits before tax and non-recurring charges (see below) for 2008 to be at the low end of analysts' expectations.

For the first nine months of 2008, total turnover in our merchanting division is up by 3.1%. Whilst like-for-like turnover per trading day for this period was down by 1.2%, the trend of like-for-like sales in both September and early October has deteriorated sharply to minus 10%.

Total turnover in the general merchanting business is up by 2.1% with like-for-like turnover per trading day down by 1.1%. For this period, our specialist merchanting business has total turnover up by 4.9% and like-for-like turnover per trading day down by 1.4%.

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.

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%.

Wickes gross margins are slightly below last year, reflecting modest increases in promotional activity throughout the industry.

Since the end of 2007 we have added a net 82 new branches to our merchanting network and a net 8 new Wickes stores representing retail space growth of 4.0%. We now trade from 1,241 locations including 26 branches operated by our associate, Toolstation.

Whilst we expect to grow our business in 2008, largely a result of the network expansion activity in the first half, 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. 

Our cash flow continues to be in line with expectations, with gains in working capital and reductions in capital expenditure partly mitigating the difficult trading conditions. We have also maintained significant headroom against the new £1 billion 5 year facility agreed in April. However, we now believe further action is necessary. 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.

Also, the Group is evaluating the requirement to incur non-recurring charges reflecting the impact of the deteriorating trading environment. This impact includes reorganisation costs stemming from the actions being taken to reduce costs and a potential reduction in the holding value of certain assets.

We expect to continue to gain like-for-like market share, to manage gross margin actively and to apply cash generated to reduce borrowings. Nevertheless, we believe it is prudent to take early, more extensive action, in view of the steeper decline in construction activity that is now materialising. These actions are aimed at strengthening the Group's financial and trading flexibility in more challenging markets.

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Enquiries:

Geoff Cooper, Chief Executive
Paul Hampden Smith, Finance Director
Travis Perkins PLC	[phone]
David Bick/Mike Feltham/Mark Longson
Square1 Consulting Limited	[phone]

 

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