Travis Perkins has reported a loss in 2018, as the group wrote down £246 million against the value of its discount KBB chain Wickes.
The firm said full-year sales at Wickes declined by 2.5%, and by 4.4% on a like-for-like basis against an “extremely challenging” UK DIY market environment.
The first six months of the year were “particularly difficult”, the firm said, blaming the Beast from the East for ruining its peak Easter trading period.
But shares in the group jumped more than 10% in morning trade to reach 2019 highs as investors applauded major cost-cutting and business simplification initiatives across the group and suggestions that trading conditions had picked up at Wickes.
John Carter, Travis Perkins chief executive, said: “The group delivered a solid performance overall in 2018 despite a challenging market backdrop. We took concerted self-help actions during the year, and the benefits of this cost reduction, together with improved trading, drove an improved profit performance in the second half of the year.
“In December 2018, we set out our intention to focus on delivering best-in-class service to trade customers and to simplify the group. To that end, removing the divisional structure within merchanting will enable an increased focus on customers at a business unit level, speed up decision-making and, at the same time, reduce costs.
“In the longer term, the group remains focused on generating sustainable profitable growth for shareholders and we will achieve this by allocating capital and resources to our most advantaged businesses. We are making good progress on the preparation for the disposal of the Plumbing & Heating division, and are seeing an encouraging improvement in trading and good momentum in Wickes.
“While we remain positive about the long-term outlook for our end markets, we are planning for uncertain market conditions to continue in the near term. The group remains focused on self-help actions to underpin performance in the near term, while continuing to invest for the future.”
Travis Perkins reported pre-tax losses for the year of £49m, down from £290m in 2017. Not accounting for Wickes and Tile Giant impairment charges, restructuring costs and IT-related write-downs, Travis Perkins booked a small year-on-year rise in pre-tax profits, up 1.2% to £347m.
The firm said Wickes KBB sales were “hard hit” in the first half of the year, down 10% against the comparative period. It partially blamed a poor promotional period in the final quarter of 2017 but also put it down to a challenging retail environment.
Kitchen and bedroom lead activity at Wickes picked up pace in the final six months of the year, translating into improved sales in the final three months of the year. The firm suggested that it was benefitting from B&Q’s decision to end its installation service.
Adjusted operating profit at Wickes declined by 19% in the year, but this was split between a 39% decline in the first six months, followed by 15% growth in the final half of the year.
“This recovery can be attributed mainly to the level of cost reduction that was achieved in the year, with significant reductions in central support services, reduction in shrinkage and efficiency gains in the distribution network, as well as the improved trading in Q4,” Travis Perkins said.
In a trading update to the London Stock Exchange toward the end of last year, Travis Perkins told shareholders that it had embarked on a major reorganisation plan to cut costs and drive efficiency savings across its businesses, focusing on its merchanting operations.
It said it would focus on strengthening the performance of Wickes in the short term but would look to “review the options for maximising the value of Wickes” in the medium term.