Travis Perkins reveals slump in profits amid branch closures
Builders' merchant and Wickes DIY chain owner Travis Perkins has posted a 67% slump in annual profits after taking hefty charges from branch closures and its troubled plumbing and heating business.
The group, which also owns Toolstation, revealed a £235 million impairment charge largely on its embattled heating and plumbing and tile businesses, which are under review.
It also took a £57 million hit to cover costs of its plan to shut more than 30 branches, affecting 600 jobs, and an overhaul of its supply chain.
This left bottom line pre-tax profits down by more than two thirds, at £73 million against £224 million in 2015.
Shares fell more than 6% after the full-year figures.
Travis, which employs 28,000 staff, warned over job losses in October as it unveiled the branch closures, while it also said it was axing 10 smaller distribution centres.
The job cuts are impacting its trade brands, such as Travis Perkins, Benchmarx, and plumbing and heating businesses BSS and PTS.
Its retail chains Wickes and Toolstation are not affected by the overhaul.
Travis shares also came under pressure as it cautioned over challenges for the year ahead, with worries over the impact of the weak pound and a possible slowdown in the housing market.
John Carter, chief executive of Travis, said: "The sharp decline in the value of sterling since June 2016 has created cost pressures on imported goods and materials and the expectations for secondary housing market transactions and growth in the repair, maintenance and improvement market have weakened."
He cautioned that rising inflation was set to hit home buyer demand, which in turn could impact builder merchant sales.
He said: "Pressure on consumer discretionary spending from rising inflation could impact secondary housing transactions in the second half of 2017."
"Any significant reduction in consumer confidence may have a more pronounced impact on big-ticket purchases such as kitchens and bathrooms which make up around 10% of the group's sales," he added.
But Travis is hoping that any knock to sales will be "broadly" offset by price increases.
Results for 2016 showed underlying earnings slumped 21.7% to £36 million in its heating and plumbing division, but its Wickes and Toolstation division saw underlying operating profits rise 6.3% to £101 million.
Travis said it will report back on its plans to transform the heating and plumbing division at the 2017 results.