REG-Travis Perkins Travis Perkins: Capital Markets Update - 'Simplifying our business to improve returns'

Travis PerkinsAnnouncement

04/12/2018 07:05

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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.
   The issuer is solely responsible for the content of this announcement.

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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 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.

   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 £20-30m 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.

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   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

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