Travis Perkins profits down despite increased sales

Travis Perkins sales were up for the first half of the year, but profits both for the group as a whole and in its plumbing and heating division took a tumble.

The home improvement group, which owns Wickes, Benchmarx and Toolstation, saw its plumbing and heating division revenue fall 1.5% in the first half of 2017 and a drop of 1.2% on a like-for-like basis.

Growth in the first quarter was stronger than in Q2, it said, which was driven by trade customers buying in advance of manufacturer-led price increases.

Operating profit declined by 31.6%, from £19 million in H1 2016 to £13m this year, as a result of lower operating leverage resulting from the decrease in volume in addition to the “very competitive” market.

For the group as a whole, revenue increased by 3.5% (2.7% on a like-for-like basis) to £3.2 billion in the first half of 2017, up from £3.1bn in 2016.

Adjusted operating profit fell by 2.1% to £190m, largely due to the challenging plumbing and heating market and recent investments.

Free cash flow of £188m was generated, with strong cash convergence of 99%.

Travis Perkins chief executive John Carter said: “We executed our plan well and delivered a solid overall performance in the first half of 2017 against a challenging market backdrop of pronounced input cost inflation and market volatility. The robust growth and outperformance in our contracts and consumer divisions build on strong customer propositions and successful investments in those businesses.

“In the first half of the year, the Group made a conscious decision to recover input cost inflation selectively through disciplined pricing activity. While this had some impact on trading volume, it enabled us to maintain Group gross margins and positions the business well for the future.

“We have announced a comprehensive transformation plan in our plumbing and heating division, which is designed to stabilise performance and to create more options to maximise shareholder value. While we remain cautious on the macro-economic outlook for the second half, the group remains focused on executing the clear plans it has in place which will deliver strong cash generation and maximise returns.”

Travis Perkins expects the outlook for the remainder of 2017 to see strong market growth in the long-term drivers such as new builds and the repair, maintenance and improvement of existing homes.

Consumer confidence and housing transactions painted a mixed picture for the near-term performance of the group and it said that it expected this to continue into the second half of 2017.

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