February 28, 2018 / 7:31 AM / a year ago

UK's Travis Perkins warns of flat 2018 and slows some investment

LONDON (Reuters) - Travis Perkins, Britain’s biggest supplier of building materials, dashed hopes for an increase in profit this year, forecasting a flat performance, and said it would slow investment in non-priority areas.

FILE PHOTO: Bricks are seen at the Vauxhall depot of building material supplier Travis Perkins in London, Britain, October 25, 2013. REUTERS/Neil Hall/File Photo

Shares in the group, which trades from over 20 businesses including Travis Perkins, Wickes, BSS and Toolstation, fell as much as 9.2 percent early Wednesday, after 2017 profit fell and it predicted a mixed market backdrop would continue in 2018.

“As a result, we will be focusing capital investment behind our key priorities, and slowing investments elsewhere,” said Chief Executive John Carter.

Investment in 2018 would focus on the network expansion of Toolstation, a limited number of store refits in Wickes, and digital platforms.

Carter said the group would look to maintain a tight control of costs and forecast a 2018 performance similar to 2017’s.

Analysts, who had anticipated increased profit in 2018, said forecasts would be downgraded by about 4 percent.

Travis Perkins’ customers include local authorities, big building firms, traders such as plumbers and kitchen fitters, and regular consumers, with its fortunes closely tied to housing transactions and consumer confidence.

British consumers are being squeezed by inflation and are seeing wages fall in real terms. Official data published this month showed retail sales barely rose in January.

The Bank of England expects the consumer squeeze to ease in 2018 as inflation cools and wage growth ticks higher, although surveys published on Wednesday suggest sentiment remains subdued.

Travis Perkins, whose roots trace back to Georgian times, when its forerunner set up shop in 1797, made adjusted operating profit of 380 million pounds in 2017 - below analysts’ consensus forecast of 384.8 million pounds and the 409 million pounds made in 2016.

The decline reflected higher operating costs in the general merchanting and consumer divisions and lower profits in plumbing and heating.

Prior to Wednesday’s update analysts’ average forecast for 2018 adjusted operating profit was 395.3 million pounds.

Revenue in 2017 was up 3.5 percent to 6.43 billion pounds and the dividend was increased 2.2 percent to 46 pence a share.

Shares in Travis Perkins, down 8 percent so far this year, were 128.5 pence lower at 1,306.5 pence at 0910 GMT, valuing the business at about 3.4 billion pounds.

($1 = 0.7192 pounds)

Reporting by James Davey; Editing by Kate Holton and Mark Potter

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