Strong results at Travis Perkins marred by plumbing impairment

A strong set of results from Wickes owner Travis Perkins were marred by difficult trading and impairments in its plumbing businesses in 2015, as the company released its final results on Thursday.

The FTSE 100 builders' merchant saw revenue increase by 6.5% to £5.94bn during the calendar year, with adjusted operating profit increasing 7.6% to £413m. Excluding property profits, adjusted operating profit was up 8.7% to £389m. Adjusted profit before tax was up 5.5%, to £382m.

On a reported basis, operating profit was down 25.9%, however, to £254m. Reported profit before tax dropped 30.2% to £224m, reflecting impairments in the company's plumbing supplies businesses.

Adjusted earnings per share improved 4.3% through the year, to 124.1p, while basic earnings per share dropped 36%, to 67.8p.

"The group has delivered a good performance in 2015 despite the weaker than expected RMI market in the second half of the year," said chief executive John Carter.

"We made very good progress on our key strategic priorities; modernising General Merchanting, transforming Wickes and re-segmenting the Plumbing & Heating division, and we continued to improve our customer propositions, delivering access to greater ranges with better availability," he added.

Carter said increased capital and operational investments were enabling Travis Perkins to leverage the scale of the business and exploit structural advantages in sourcing and supply chain, driving its continued performance.

"We believe that the growth drivers in our markets remain strong and welcome the return to growth of mortgage approvals and secondary housing transactions in the second half of 2015," Carter explained, saying that had supported good growth in RMI sales for the group in January and February 2016 as well.

"This gives us further confidence that through our strategy we will successfully deliver against our medium-term targets of sales outperformance, low double-digit profit growth and improving returns."

During the year, the company's network expansion continued, with a net of 53 new branches and stores opened, including implants.

The group also reported significant progress on its major strategic fronts, including supply chain investments in its General Merchanting division and completion of the re-segmentation in Plumbing and Heating.

Travis Perkins had free cash flow of £317m during tye year, at a cash conversion rate of 77% - up from 66% in 2014. It was used to fund £134m of growth capex during the year.

Its lease-adjusted return on capital employed improved to 10.5%, which the board said was reflective of higher earnings, offset by the increase in capital employed including the £104m invested in freehold property.

The company said a non-cash impairment charge of £141m was recognised against goodwill and other intangible assets of the PTS and F&P businesses, given challenging market conditions.

Travis Perkins' board proposed a final dividend of 29.25p, taking the year's total dividend per share to 44p, an increase of 15.8%.