Travis Perkins is also still considering the role of DIY chain Wickes within the group.
An internal review has determined that Travis Perkins needs to sharpen its focus on trade customers rather than high street consumers.
At the end of July Travis Perkins announced a pre-tax loss of £123m in the first half of 2018 because of its exposure to the consumer DIY market. It booked a £246m write-off of goodwill in Wickes and launched the business review. [See our previous report here.]
That review has now concluded with the decision to sell the plumbing and heating business and sort out Wickes before seeing if that can be offloaded too. The restructuring is expected to save £20m to £30m a year in costs.
In a statement today the board said: “Following a comprehensive review, the board has concluded that the group will focus on serving trade customers through advantaged businesses in attractive markets, and will simplify the group to reduce complexity and cost to drive returns.
“The heritage of the Travis Perkins Group is founded in serving its UK trade customers and this represents the majority of group activity today, with generalist and specialist merchants continuing to see the largest share of industry growth with returns remaining resilient over time. Whilst trade customers are becoming increasingly demanding of the quality of service they receive, they still place considerable value on a convenient and reliable supply relationship.
“The group will focus on delivering best in class service to trade customers through businesses with clear competitive advantages in their markets. The group aims to deliver sales growth through market outperformance, building on the momentum in the Contract Merchanting businesses, the continuing strong growth in Toolstation, and a reinvigoration of our market-leading General Merchanting business.”
It continued: “The General Merchanting division is a powerful driver of profitability and cash flows within the group, and the management team has a clear plan to improve returns through a rebalancing of decision making and an increase in local empowerment of the branch manager and sales teams. There are additional meaningful opportunities to further enhance the growth and returns profile by the effective recycling of capital over the coming years.
“In the short term, management will also focus on strengthening the performance of Wickes and capitalising on its clear competitive advantages in the DIY, small trade and Kitchen & Bathroom markets. As it is a predominantly consumer focused business, the board will also look to review the options for maximising the value of Wickes in the medium term.”
The Plumbing & Heating division has already been through a reorganisation and the board has concluded that now is the time to sell it and invest the money on more profitable parts of the business.
Travis Perkins’ various plumbing and heating brands include NSS, City Plumbing, PlumbNation and Plumbing Trade Supplies (PTS).
Chief executive John Carter said: "We have developed a clear plan to focus on delivering best-in-class service to our trade customers, and to simplify the Group to reduce complexity, speed up decision making and reduce costs. Our trade businesses hold strong positions in attractive markets, and these initiatives will enable us to concentrate our management time and capital in the highest returning areas.
Our strong balance sheet and free cash flow generation, driven by growing earnings and lower capital expenditure, will underpin our commitment to drive shareholder value and a progressive dividend."
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