The Big Boys
Travis Perkins has built itself into one of the UK’s largest builders’ merchants (along with Wolseley and Saint-Gobain Building Distribution) through acquisitions and is now intent on grabbing a lion’s share DIY retail sector. Catering to contractors and construction professionals, TP not only sells building materials but it also rents tools at more than 1200 branches throughout the UK.
TP operates specialty branches under several names, including its namesake banner, Benchmarx, Commercial Ceiling Factors (CCF), City Plumbing, Keyline, and Tile Giant.
These brands have experienced management teams and market-leading financial performance; strengths that mean the company remains confident of its ability to further strengthen its position and take advantage of opportunities that arise as the sector returns to growth.
Geoff Cooper, TP’s chief executive said 2010 would turn out to be a much tougher year for the industry than 2009. He said the retail sector would contract by between 4% to 5% this year. The housing market, however would bounce back, but only because it had reached such very low levels in 2009.
Merchants, Mr Cooper said, had to be at the “top of their game in order to have a half decent time in 2010”. Things would improve, based on long-term drivers. “Life events force turnover in the housing market,” he said.
What the UK needed was an energy-saving subsidy regime for retrofitting existing housing stock, he explained.
TP’s business had not been immune to the recession. However, its Toolstation brand, acquired in 2008, has been thriving throughout the bleak times, thanks to consumers’ willingness to use the internet. Toolstation sells through stores, online and through catalogues. “It was built from the ground up as a multi-channel operation,” Mr Cooper explained. “That means it has a much lower cost base and can therefore offer consumers better value.”
TP’s Wickes business was the company’s “best lever to make up-grading homes affordable”.
He added that Wickes’ 200 outlets were “undersized for the UK market’s demand. We really ought to have 350 stores,” he commented. The Wickes television advertising campaign has to-date cost the company just under £20m.
To add value to service, TP’s programme of branch refurbishment or relocation had seen an upswing in both business and efficiency of operation.
Financial commentators speculated that TP might consider acquiring some Wolseley business units like BuildCenter.
In business for more than 100 years, Wolseley went from shearing sheep in Australia to building some of the first automobiles in the UK to becoming the world’s largest distributor of heating and plumbing supplies to professional contractors.
The company distributes central heating equipment, fittings, lumber, pipes, underground drainage equipment, valves, and other building materials from about 4400 outlets in more than 25 countries in North America and Europe.
New Wolseley boss Ian Meakins has been highlighting what is core, what will be slimmed down, and what may be sold in due course. These included Build Center, the UK builders’ merchants’ chain, and Brossette, the plumbers’ merchant in France. “The aim is to improve these businesses in the short-term and then either reclassify them as core or sell them,” he stated.
The targeted underperformers account for 27% of capital employed and 19% of sales, but only 5% of trading profit. Wolseley has already quit Ireland, Belgium, the Czech Republic, and Slovakia.
Mr Meakins regarded the other businesses in the group as ‘core’, classifying them as either ‘growth engines’ or ‘synergy drivers’. “Over time, the group’s intention is to operate fewer, larger related businesses in core geographies,” he said.
Planned cost reductions were achieved ahead of plan. Net debt was brought down by £49m to £910m.
However, the group had written off £164m after mothballing a mammoth project to streamline its supply chain management in North America. A further £71m of goodwill has been written off its UK Brandon Hire and Encon businesses.
Jewson/Saint-Gobain Building Distribution UK & Ireland
Jewson, a part of the Saint-Gobain Building Distribution division, operates more than 900 branches throughout the UK and is Britain’s third building materials merchant behind Wolseley UK. Jewson stores supply timber and building materials (bathrooms, doors and windows, drains and foundations, drylining and insulation, flooring, hardware, ironmongery, landscaping, masonry, painting and decorating, plumbing and heating, roofing, and tools) to mostly small contractors and DIY-ers.
About half of the the company’s stores offer tool and equipment rentals.
Name of CEO – Gavin Slark
There’s always something coming down the pipeline at the BSS Group. The company buys, sells, and distributes pipeline, heating, plumbing, ventilation, and other products. It serves the building services, manufacturing, maintenance, and other sectors through its industrial and domestic divisions. Its former division operates pipeline and heating solutions and flow control solutions businesses out of over 60 branches in the UK and Ireland. The Domestic Division operates through about 300 PTS (Plumbing Trade Supplies) branch locations, as well as through about 10 F&P Wholesale locations, which supply second-tier merchants.
The BSS Group has three divisions: Domestic, Industrial and Specialist.
Its trading update for the year ending 31 March 2010, showed total revenue for the financial year to be marginally above last year.
Trading performance has improved as the financial year progressed, with fourth quarter like-for-like sales growth of 5.1% against a like-for-like sales decrease of 2.6% in the third quarter. A sustained period of cold weather and the boiler scrappage scheme benefited the merchant’s Domestic Division.
The core repair and maintenance business that underpins revenue has remained resilient throughout the financial year and new revenue initiatives, including heating spares, renewables and above ground drainage, are continuing to show encouraging progress, said chief executive, Gavin Slark.
“As expected, gross margin percentage in the year is lower than last year reflecting competitive market conditions, increased contract sales and strong trading performance from F&P Wholesale. Gross margin improvement in the new financial year is a key priority.”
Mr Slark also reported that costs had been tightly managed throughout the year. “We expect like-for-like costs, excluding new branches and acquired businesses, to be around 6% below last year,” he said.
The BSS board anticipated that earnings in the current year, after exceptional costs and amortisation of acquired intangibles, will be not less than market expectations.
“The Group’s financial position remains strong with expected net debt at 31 March 2010 of around last year’s closing level of £86m. During the year, £12m has been spent on acquisitions and in excess of £9m on dividends,” Mr Slark commented. The Group’s preliminary results are due on 25 May
Name of MD – Kelvin Stevens
Since his appointment as managing director in late 2009, Kelvin Stevens has remained focused on building relationships with the customer base, while listening and reacting to their needs on the trade counter.
The future strategy of PTS is to continue this development by putting experienced and knowledgeable staff into its nationwide branches.
Name of CEO – Leo J Martin
The Grafton Group is the number one builders’ and plumbers’ merchanting group in the Republic of Ireland.
Its principle brands are Buildbase, Jackson Building Centres, Selco Builders’ Warehouse, Plumbase, McNaughton Blair, Chadwicks, Heiton Buckley. Its retail brands are Woodies DIY/Atlantic Homecare, In-House @ The Panelling Centre.
The company has building and plumbing supply outlets under the Chadwicks and Heiton Buckley brands, and Woodie’s DIY stores in Ireland.
In the UK, Grafton operates 200-plus Plumbase plumbing supply stores and about 220 building supply stores under the Buildbase and Jackson brands.
In Northern Ireland, the company operates about 20 Macnaughton Blair building supply stores. Grafton also runs about a dozen plastic and concrete manufacturing plants, including about 10 EuroMix dry-mortar facilities, in England and Scotland. Grafton acquired Heiton Group in early 2005.
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