Travis Perkins slashes jobs as Reckitt misses Q3 growth target

Added 19th October 2016

The market responded harshly to the third quarter announcements made by Travis Perkins and Reckitt Benckiser Wednesday, causing shares in the companies to topple 6.9% to 1384.5 and 2.3% to 7156.5p, respectively.

Travis Perkins slashes jobs as Reckitt misses Q3 growth target

Britain’s biggest supplier of building materials confirmed it would be closing over 30 branches, resulting in 600 redundancies to keep ahead of an unpredictable market.

During the third quarter, group sales rose by 3.4% but this was little consolation to chief executive John Carter who said “it is still too early to predict customer demand in 2017.”

While the general merchanting division “delivered a solid result” over the period and the firm’s consumer and contracts businesses “materially outperformed” their respective markets, sales from Travis Perkins’ plumbing and heating unit fell flat.

In light of the disappointing plumbing and heating sales, which dropped by 3.9% and by 4.1% on a like-for-like basis, Travis Perkins said it anticipated adjusted earnings before interest, tax and amortisation for the year to fall “slightly below” the current market consensus of £415m.

The FTSE 100 builder’s profit warning comes at a time when many other companies in the construction sector seem to have shaken off their initial Brexit-woes and returned healthier sales figures than anticipated.

Although Travis Perkins’ share price has recovered after plunging as low as 32% in the initial weeks after the referendum, it still remains 27% lower than its close before the Brexit vote.

By contrast, Reckitt saw its shares soar over 12% within the same time frame as equity investors flocked to the safety of consumer goods stocks post-Brexit.

Despite the relative stability of Reckitt’s share price, its third quarter sales growth remained strained by the ongoing fallout from the South Korean disinfectant scandal.

Numerous South Korean retailers and consumers initiated a boycott of Reckitt’s products after it was revealed a humidifier disinfectant led to the deaths of 96 individuals. The company behind the Dettol, Lemsip and Dr Scholl’s brands said the controversy had adversely impacted its group like-for-like performance by close to 1.5% in the third quarter and hit its total developing markets revenue by mid-single digits. However, the firm was still able to rake in £788m in revenue from the developing markets region.

Like-for-like sales in the Europe and North America region, which account for 65% of the company’s net revenue, were flat over the period, the firm reported.

While Reckitt brought in £2.6bn in total revenue in Q3, the firm said it expects to see like-for-like growth of 4% for the full year, the lower end of its original target.   

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