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Travis Perkins: expanding estate hides commodity and Brexit pressures

Sales were up for the building materials supplier but growth began to slow ahead of the referendum
August 3, 2016

Overhauling and expanding its store network did a good job of pulling in customers for Travis Perkins (TPK) during the first half of the year. Toolstation opened 16 new stores in the UK and five in the Netherlands, while 14 Wickes stores were revamped with a new format and another added to the chain. As a result, sales for the consumer business were strongest, up 11 per cent on the previous comparable period.

IC TIP: Hold at 1541p

The performance of the plumbing and heating business was less buoyant as sales volume growth was offset by competition and price deflation for products such as copper tubes. As a result like-for-like sales were flat and the adjusted operating margin fell from 3.1 per cent to 2.7 per cent.

Growth in the higher-margin general merchant business slowed during the second quarter as some clients chose to defer projects ahead of the referendum. Nevertheless, the conversion of 13 Keyline branches to Travis Perkins and the opening of 10 Benchmarx branches meant sales were up 7 per cent.

Analysts at Peel Hunt expect adjusted pre-tax profit of £425m for the 12 months to December 2016, leading to EPS of 138.9p (from £382m and 125.5p in 2015).

TRAVIS PERKINS (TPK)

ORD PRICE:1,541pMARKET VALUE:£3.85bn
TOUCH:1,541-1,542p12-MONTH HIGH:2,261pLOW: 1,090p
DIVIDEND YIELD:2.9%PE RATIO:21
NET ASSET VALUE:1,145p*NET DEBT:18%

Half-year to 30 JunTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20152.9415951.314.75
20163.1117655.715.25
% change+6+11+9+3

Ex-div: 6 Oct

Payment: 8 Nov

*Includes intangible assets of £2.1bn, or 846p a share