Travis Perkins closes 30 branches amid uncertain construction backdrop

One of the first companies in the construction sector to provide an update on the third quarter, Travis Perkins reported that market conditions have worsened and it has decided to close more than 40 sites and launch a cost-cutting programme.

The FTSE 100 group said that while its consumer, contracts and general merchanting businesses had outperformed the market, with total sales growing 3.4% in the three-months to the end of September and like-for-like (LFL) growth of 2.0%, its full year profits were likely to disappoint.

Adjusted earnings before interest, tax and amortisation (EBITA) is now expected to come in "slightly below" current market consensus which the company said was around £415m, with Factset putting at £420m.

Chief executive John Carter said the closure of 30 branches and 10 smaller distribution and fabrication centres, plus writing off certain IT legacy equipment reflected the company's uncertainty about predicting customer demand in 2017, with volatility in demand in July turning into "softer" market conditions in August and September.

Along with further efficiency changes to the supply chain, this will result in an exceptional charge of £40-50m this year.

Carter implied the situation could have been worse but that the general merchanting arm delivered a "solid" result of 0.6% LFL growth alongside "very strong" performances from consumer (6.3% LFL) and contracts (5.7%) businesses that "materially outperformed" their markets.

Plumbing and heating sales declined by 3.9% in the third quarter and by 4.1% LFL, however, which has led to management reviewing these operations.

With the changes made, Carter expressed his confidence in the coming months: "The strength of the group's balance sheet and the competitive advantage we have created through the investments we have made position us well to continue outperforming the markets we compete in and drive shareholder value over the medium term."

The closure of operational focus remains on improving all of our customer propositions, optimising our networks, intensifying our use of space and exploiting the scale advantage we have created. We expect this focus to underpin our outturn for 2016, albeit with Adjusted EBITA slightly below current market consensus of around £415 million".