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Plumbing problems at Travis Perkins

Plumbing problems at Travis Perkins

Problems in Travis Perkins' (TPK) plumbing and heating division contributed to an exceptional non-cash charge of £235m against goodwill and tangible assets in its full-year results, as well as a further £57m to cover the closure costs of underperforming branches, supply chain rationalisation and restructuring. Otherwise, the builders' merchant managed last year's challenges reasonably well, with adjusted operating profit edging ahead to £392m. But the nasties sent the share price down 6 per cent on the day.

The plumbing and heating market has been flat in the last few years, hit by lower repair, maintenance and improvement (RMI) volumes and stronger competition including online operators.

At least the consumer and general merchanting divisions delivered higher profit, helping drive overall cash conversion up from 77 per cent to 107 per cent. That helped fund capital expenditure of £187m. This included a further 43 Toolstation stores and 18 Benchmarx kitchens outlets. A further 600 product lines were added as well as a two-hour click-and-collect service for Travis Perkins' merchanting outlets. Some 46 Wickes stores were refitted, and now provide a one-hour click-and-collect service as well as one-hour time slots for home deliveries.

Analysts at Peel Hunt forecast adjusted pre-tax profit of £403m for the year to December 2017 and EPS of 132.6p (from £381m and 120p in 2016).

TOUCH:1,468-1,470p12-MONTH HIGH:1,978pLOW: 1,090p

Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
% change+5-67-92+2

Ex-div: 13 Apr

Payment: 26 May

*Includes intangible assets of £1.89bn, or 753p a share


The capex should help the retail operations challenge the digital nous of Kingfisher's (KGF) Screwfix. But with lower transactional volume in the housing market and subdued RMI spend, there is little scope for a rerating. Hold.

Last IC view: Hold, 1,541p, 3 Aug 2016

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By Jonas Crosland,
02 March 2017

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