Travis Perkins offloads Wickes
31 July 2019, 11:56 | Updated: 31 July 2019, 12:01
Kitchen and bathroom retailer Wickes is to be "demerged" by Travis Perkins.
Parent company, the Northampton-based Travis Perkins, which sells building materials to traders, said it wants to simplify the group and focus less on selling to the general public.
The company has revealed the firm has spent £50m stockpiling extra products to ensure there are enough building materials available in the event of a no-deal Brexit.
But investors will be particularly interested in the Wickes deal, which could see the company worth between around £400mn and £500m when demerged next year.
The company said more details of the demerger and its ownership structure will be revealed "in due course".
The company said:
"The demerger of Wickes is a key component of the overall Travis Perkins strategy to focus on trade customers and to simplify the group."
It will cost £3.5m in fees and IT separation costs, the firm added.
Like-for-like sales at Wickes grew 9.7% in the six months to June 30, compared with the same period a year ago. But 2018 had been particularly difficult, so the comparison was a weak one.
Revenues at the retail division, which also includes Tile Giant, rose 8.9% to £695 million and adjusted profits were up 48.6% to £52m.
Travis Perkins added:
"The board believes that Wickes, under a management team led by David Wood, is well positioned to thrive as a stand-alone business.
Wickes will have the autonomy to execute on its strategy and allocate capital to its customer proposition and growth opportunities with a clearer focus."
The main area of expansion in the business will be in its Toolstation brand, with 21 new branches opened in the last six months.
Sales at Toolstation grew 23.1% to £208m, with adjusted pre-tax profits of £13m for the period, compared with £10m a year earlier.
Bosses admitted its Keyline business had a tough period, and that the disposal of its ecommerce business Built cost £12.6m.
On Brexit, the company revealed that it increased its inventory of stock by £50m "in anticipation of the UK's potential exit from the EU in the spring".
"This elevated level has been maintained given the delay in the UK's expected departure from the EU, and the group will make decisions on the optimal level of inventory to protect customers' access to materials."
Overall, revenues rose 6.9% to £2.77 billion, with pre-tax profits of £20.8m compared with a £115.6m loss during the same six months a year ago. On the company's preferred profits measure, which strips out certain costs, they were up 14.7% to £195m.
Bosses added that they were on track for annual cost savings of £20m to £30m by next year, and hope to benefit from "the continued underinvestment in the repair, maintenance and improvement of the existing, ageing housing stock."