Analysis: Travis Perkins backs tech innovation amid challenging environment

As we reported earlier today, Travis Perkins has reported a slump in annual profits, with a rise in sales being offset by higher costs. Adjusted pre-tax profit fell 10% to £343 million, as revenue grew by 3.5% to £6.43 billion.

The group is the UK's largest supplier of building materials to the house building, construction, trade and retail sectors. It operates 22 businesses including Travis Perkins, Wickes, Toolstation, BSS, and City Plumbing Supplies, with 2,200 outlets, 28,000 employees and 19 product brands. 

Looking ahead, the UK needs more new homes and many existing properties are in need of investment. In the here and now, however, Travis Perkins has been hit by a sharp rise in cost price inflation, driven by a weaker pound following the Brexit vote. Consumer confidence also declined steadily through the course of 2017.

Chairman, Stuart Chambers, kicked off an investor presentation with a few words on what to do in the event of an alarm drill. He might have been forgiven for then faking a drill in order to escape a grilling over a less than stellar set of numbers.

But that didn’t happen and instead we got lots of talk around a tough 2017 and continuing uncertainty in the group’s markets. And also being flexible in the face of whatever lies ahead, the importance of looking after the customer, along with a firm commitment to investing in the business whilst managing the cost base accordingly.

Omnichannel investment

Travis Perkins might not be the coolest retailer out there. The building trade is, after all, relatively old-fashioned and builders and tradesmen have traditionally been men of a certain age. But things are changing and the group has been making a concerted effort to stay ahead of the technology curve.

Last year, Essential Retail reported that it had upgraded its inventory management by deploying analytics software from SAS. In 2016, Travis Perkins struck a deal with Infor to use its CloudSuite enterprise software to build better customer relationships and improve employee productivity. The ERP deployment, the biggest systems change in the company’s history, is due to be wrapped up by 2020, with the first phase of the project set to complete in one part of the business this year.

In 2017, meanwhile, the group’s IT team scooped the Best DevOps Team award at the Computing Awards. And Travis Perkins also announced the three finalists for its accelerator programme, BreakThru, the brainchild of its first chief digital officer, Cheryl Millington, and run in association with L Marks. The companies, SpecifiedBy, Soter Analytics and CarTap, were chosen from over 80 start-ups across Europe, Asia, North America and Australia. They received 11 weeks of access to industry mentoring and expertise, guidance on how to develop their solutions and pilot opportunities.

Bricks and clicks

The branch network remains important (“it keeps us close to the customer”). There were 27 Wickes store refits last year, which are delivering a significant sales uplift compared with the previous formats. But, given challenging UK DIY market conditions, just three additional stores were opened in 2017.

Digital is the future and the need to invest in IT is ongoing. “There will be further development of digital channels, not just the trading website, but also, for instance, the implementation of electronic processes within our yards, replacing manual processes,” said CEO, John Carter. “The emphasis is on multichannel for customer transactions and fulfilment and network convenience and optimisation. Merging physical and digital networks and ongoing investment is vital so that we continue to remain relevant to our customers.”

No surprise, therefore, that IT CapEX will be broadly similar this year. But at what point does payback from IT investment come into play? You sometimes need to look at IT investment without payback in mind, Travis Perkin countered; if you don’t invest you limit how well you can serve your customers, it argued. The group’s mantra is, are we helping our colleagues in serving our customers and are we improving the customer experience?