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Travis Perkins (TPK)
Travis Perkins: Capital Markets Update - 'Simplifying our business to
improve returns'
04-Dec-2018 / 08:00 CET/CEST
Dissemination of a Regulatory Announcement that contains inside information
according to REGULATION (EU) No 596/2014 (MAR), transmitted by EQS Group.
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04 December 2018 - Travis Perkins plc
Capital Markets Update - "Simplifying our business to improve returns"
Highlights
· Focus on our trade customers and drive returns from our advantaged trade
businesses
· Simplify the Group and streamline the cost base to drive strong cash
flow and earnings momentum
· Intention to divest the Plumbing and Heating Division following
successful transformation
· Improve the performance of Wickes to create options to maximise value
over the medium term
John Carter, CEO, commented:
"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."
Today, the Travis Perkins plc management team is hosting a capital markets
update in London. There will be no new disclosures on current trading
conditions with overall performance consistent with expectations at the time
of the third quarter trading update in October. The event will cover the
Group's immediate priorities and ambitions for the future.
Overview
The fundamental long-term growth drivers of the business remain robust, with
a continued shortage of housing in the UK and underinvestment in the
maintenance and improvement of the existing, ageing, housing stock. In the
shorter term, market conditions remain uncertain, impacting secondary
housing market transactions and consumer confidence. Against this backdrop,
the Group announced in July 2018 that it would undertake a comprehensive
review of its business, with a view to driving stronger performance and
enhanced value for shareholders over the medium term.
Following a comprehensive review, the Board has concluded that t he 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.
Focus on serving trade customers through advantaged businesses
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.
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.
Simplifying the Group
The Group will focus on simplifying the business to reduce complexity, speed
up decision making and improve agility whilst further reducing the
above-branch and distribution cost base. The Group is targeting further
annualised cost savings of GBP20-30m which will be delivered over the next 18
months. This is expected to underpin earnings progression and create a
platform from which to drive operating cost leverage going forwards.
Following on from the success of the Plumbing & Heating transformation
programme, the Board has concluded that as part of the process of
simplification, now is the time to explore the potential sale of the
Plumbing & Heating division. This will facilitate more focused management
attention and capital deployment on the higher returning areas, and creates
further opportunities to simplify the Group and reduce costs.
Expected financial outcomes
The free cash flow generation of the Group is expected to strengthen over
the medium term, driven by improving earnings and lower capital expenditure.
Future capital investment will be focused on reinvigorating the General
Merchanting business, completing the major IT programmes and expanding both
the Toolstation UK and Europe businesses.
This strong free cash flow generation will further strengthen the Group's
balance sheet. The Group reconfirms its medium-term target for lease
adjusted debt to EBITDAR of 2.5x and will maintain a progressive dividend
policy.
Investor / analyst enquiries
Graeme Barnes | +44 7469 401819 | graeme.barnes@travisperkins.co.uk
Zak Newmark | +44 7384 432560 | zak.newmark@travisperkins.co.uk
Media enquiries
David Allchurch | Tulchan Communications | +44 207 353 4200
The capital markets event will be held at the Cavendish Conference Centre,
at 22 Duchess Mews, London, W1G 9DT. Registration will begin at 9.30am, with
presentations starting at 10.00am.
The event will be audiocast live from 10.00am, and copies of the
presentation and audiocast will be available on the Travis Perkins Investor
Relations website following the event.
ISIN: GB0007739609
Category Code: UPD
TIDM: TPK
LEI Code: 2138001I27OUBAF22K83
OAM Categories: 3.1. Additional regulated information required to be
disclosed under the laws of a Member State
Sequence No.: 6741
EQS News ID: 753969
End of Announcement EQS News Service
(END) Dow Jones Newswires
December 04, 2018 02:01 ET (07:01 GMT)
