Travis Perkins revises guidance after weak third quarter

24th Oct 2024 07:19

(Sharecast News) - Travis Perkins revised its operating profit guidance on Thursday, after reporting a 5.7% decline in third-quarter group revenue thanks to weakness in its merchanting segment.

The FTSE 250 building materials supplier said like-for-like revenue fell 6.8% during the three months to 30 September, as it continued to face challenges in market share and volume.

As a result of the merchanting shortfall, the board said it now expected adjusted operating profit for the 2024 financial year to be around £135m.

While it noted that key end markets were stabilising, it still anticipated a slow and uneven recovery, with meaningful financial improvement likely to begin in the second half of 2025.

The merchanting division, which saw a like-for-like revenue drop of 8.2% in the third quarter, was hit particularly hard by underperformance in its general merchant business.

Both volume and margin in this segment fell short of expectations, despite efforts to adjust pricing.

Market conditions across the wider merchanting business were mixed, with some specialist units showing signs of competitive pressure, while others were beginning to see early signs of renewed confidence.

In contrast, Toolstation delivered stronger results.

UK revenue increased by 2.9% during the quarter, and Benelux like-for-like sales grew 9.6%.

The company said it was progressing with the closure of its loss-making Toolstation France operations, with eight branches sold and the remaining 43 branches, along with the online store, ceasing operations.

Full closure there was expected by the end of the financial year.

"It is clear that the group has allowed itself to become distracted and overly internally focused which has led to the underperformance in recent periods," said the company's new chief executive officer Pete Redfern.

"We now need to get back to a focus on operational execution - delivering great products and great customer service and better leveraging our reach and scale.

"Over the last nine months the team has made good progress on implementing cost discipline, improving working capital management and exiting Toolstation France."

Redfern said that in addition to supporting these ongoing actions, his immediate priorities were driving and incentivising branch-led performance and motivation, identifying further ways to make the business run more efficiently and ensuring that the company was ready for the anticipated recovery in the UK construction market.

Reporting by Josh White for Sharecast.com.