Travis Perkins has reported solid performance in 2016, despite a “difficult year in the plumbing and heating division”.
The group saw a 4.6% increase in revenue for the year ended December 31, 2016 to £6.2 billion, compared with £5.9bn in 2015. Adjusted pre-tax profit was slightly down on 2015, dropping from £382m to £381m.
The group continued to expand its network with 25 new branches and stores opened, bringing the total to 82.
However, it struggled in the plumbing and heating and tile businesses, with an exceptional non-cash impairment charge of £235m taken against the goodwill and intangible and tangible assets.
An exceptional charge of £57m was also taken to the income statement to cover the closure of underperforming branches, supply chain rationalisation and central restructuring.
Chief executive John Carter said: “2016 was another solid year for the group, with continued strong performances from the consumer, contracts and general merchanting divisions, which together contributed 90% of group adjusted operating profit. These businesses continued to benefit from the investments made in the branch network and customer propositions over the last three years, which provides a strong base for future growth.”
However, the group anticipates a mixed market outlook in 2017, and predicts that pressure on consumer discretionary spending from rising inflation could impact secondary housing transactions in the second half of the year.
It said that fewer housing transactions would have a direct impact on merchant sales volume. Any significant reduction in consumer confidence may also have a pronounced impact on big-ticket purchases such as kitchens and bathrooms, which make up around 10% of Travis Perkins sales.
“It was a much more difficult year for the plumbing and heating division driven by structural challenges for traditional merchant businesses in this segment,” Carter added. “While the network restructuring work carried out in 2014 and 2015 created a more focused branch network, further work is required and over the next six months we will be exploring all routes to enhance returns. There are improvements we can make to the ranges we offer to our customers, our availability, our online presence and our service proposition.
“The macro-economic outlook of the UK is mixed. The sharp decline in the value of the pound since June 2016 has created cost pressures on imported goods and materials, and the expectations for secondary housing market transactions and growth in the RMI market have weakened. We have a proven track record of managing our cost base and took decisive action in October 2016, announcing a restructuring programme to close underperforming branches and improve supply chain efficiency. We enter 2017 with a strong balance sheet and will continue to invest selectively in our leading businesses to further strengthen our competitive advantages, which will enable us to continue to outperform and drive shareholder value over the medium term.”