Travis Perkins to cut 600 jobs as plumbing slowdown prompts profit warning

Turnover at the building merchant grew 3.4 per cent between July and September across its network of 600 branches and 200 tool-hire outlets, which include the DIY chain Wickes. Sales rose 2 per cent on a like-for-like basis, which compares the same stores against each other.

But shares plunged nearly 6 per cent in morning trading after John Carter, Travis Perkins’ chief executive, told investors that “market conditions have worsened” in its plumbing and heating division, which makes up nearly a quarter of sales, reports the Telegraph.

“We are not satisfied with our performance and will commence reviewing these operations,” he said, adding that the company’s previously forecast annual ebita, a measure of earnings before interest, taxes and amortisation, would come in below market consensus of £415m.

Mr Carter, who joined the business as a trainee in 1978 before succeeding Geoff Cooper as boss two years ago, now plans to close 30 trade branches with the loss of 600 jobs and write off old IT systems in a restructuring that will cost between £40m and £50m.

Travis Perkins has faced challenges in the supply of plumbing and heat products, where like-for-like sales fell 4.1 per cent, amid intense price competition in the wholesale market and falling prices for materials such as copper and plastic.

It also blamed the Government’s axing of a boiler replacement incentive scheme from 2014.

A review of its plumbing, heating and bathroom markets will be complete next year, the company added.

Mr Carter warned that demand could fall in other areas of the business if the DIY market falters, but said the firm had posted a “solid result” overall between July and September, an important trading period in an industry that tends to enjoy a boost from bouts of warmer weather.

“It is still too early to predict customer demand in 2017 with certainty and we will continue to monitor our lead indicators closely,” he said.

The FTSE 100 company fared better in other areas: sales in general merchanting, the biggest part of the company, which includes Travis Perkins stores, rose 0.6 per cent on a like-for-like basis, and it opened 11 new branches.

Travis Perkins, which was formed out of the merger of Travis & Arnold and Sandell Perkins in 1988, said that trading had been volatile during July in the wake of the EU referendum, but that it had improved during August and September.

Its contracts arm, which makes up around one-fifth of sales, increased like-for-like revenues by 5.7 per cent over the three-month period, as it won deals in the commercial construction and new house-building markets.

Like-for-like sales growth of 6.3 per cent in its consumer division was helped by strong kitchen and bathroom sales at Wickes and Toolstation.

Travis Perkins shares trade at £14.06 on Tuesday morning, down 27 per cent in the year to date.