TPK to axe 600 staff as Brexit bites
Companies: Travis Perkins
FTSE 100 building and DIY retailer Travis Perkins (LSE: TPK) this morning issued a profit-warning for FY16 and confirmed the company will be axing 600 staff and closing 30 stores in a bid to make £40-50m savings.
The company said its adj EBITA is expected to be below current market consensus of £415m, and blamed the performance on its heating and plumbing business which, despite operating in a "challenging market" had not been satisfactory.
The groups total sales grew 3.4%, with LFL sales up 2%. Management said its Consumer, Contracts and General Merchanting businesses had outperformed the market, making up slightly for the performance in Heating and Plumbing.
Broker Panmure Gordon & Co said today's announcement showed history was repeating itself after a number of profit warnings in the sector last year:
"This time last year the building merchant sector delivered a number of profit warnings, with September-October sales disappointing. Unfortunately history appears to be repeating itself and Travis has warned that “Adjusted EBITA [will be] slightly below current market consensus of around £415m".
Given the uncertainty caused by the referendum we are not surprised (see our Brexit note of 22 July), when we moved our earnings estimates to below consensus."
John Carter, TPK's CEO said the General Merchanting division's results were very strong, outperforming its market:
"General Merchanting delivered a solid result in the third quarter alongside very strong performances in our Consumer and Contracts businesses where we materially outperformed our markets."
But he confirmed that the Plumbing & Heating division results weren't good:
"...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. We expect this focus to underpin our outturn for 2016, albeit with Adjusted EBITA slightly below current market consensus of around £415 million."
According to Mr Carter, it is too early to predict consumer demand next year but he said his firm will continue to monitor its lead indicators closely, and confirmed that the FTSE 100 company will be closing over 30 branches and making £40-50m of efficiency driven changes this year.
"We have a proven track record developed over many years of taking swift action to take advantage of opportunities as they arise in whichever part of the cycle we find ourselves.
The strength of the Group's balance sheet and the competitive advantage we have created through the investments we have made position us well to continue outperforming the markets we compete in and drive shareholder value over the medium term."