Profits warning at Travis Perkins as it returns money to the government

Travis Perkins has revealed that returning government support from its DIY businesses will impact profits for the year. The news follows a boom in DIY spending as the market trends experienced during Q3 continued into October and November.

The Group has continued to make good progress on retaining sales from branches closed as part of the restructuring activity during the summer. As a result of these factors, although the Group reported an overall fall in sales of 3%  Travis Perkins delivered robust, like-for-like sales growth of 8.6% during the October and November period.

In  a trading update the Group reported strong demand across the DIY market, resulting in particularly strong sales in Wickes and Toolstation. In addition the continued encouraging recovery in domestic RMI across smaller trade customers in Travis Perkins and City Plumbing outlets.

Given the status of Wickes as an essential retailer, and Toolstation, benefiting from the surge in DIY trade during 2020, both businesses will return the business rates relief received as a result of the COVID19 crisis. These businesses will also repay monies received under the Government’s Coronavirus Job Retention Scheme. This totals around £50m, which will correspondingly reduce the expected outturn for Group adjusted EBITA for 2020.

However, sales with larger customers are recovering more slowly, impacting the rate of sales recovery in the Group’s specialist BSS, CCF, Keyline and the large contract side of the P&H business. Some larger customers were more impacted by the second national lockdown in November, alongside a negative impact on the kitchen and bathroom businesses as showrooms were forced to close.

The strength of the Group’s liquidity has allowed the firm to repay £100m of VAT deferred from the first half 2020. Taking this into account, management continues to expect net year end debt to be similar to the 30 June 2020 position.