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Travis Perkins pauses divestment in difficult markets

The group is planning to offload its plumbing and heating business
Travis Perkins pauses divestment in difficult markets

Travis Perkins (TPK) is in the midst of a simplification process, as management looks to retool the building product group to focus on its trade businesses. To accomplish this, the group is looking to demerge its Wickes business, and is due to publish a prospectus later this month, with the process expected to complete in the three months to June. It is also looking to divest its plumbing and heating business, having already sold Primaflow, the division's wholesale operation, in January. However, the sale of the wider division has been put on hold due to the political and economic uncertainty in the UK.

IC TIP: Hold at 1,473p

In spite of this troubling backdrop, the group grew like-for-like sales 3.8 per cent in 2019, driven by a good performance in the merchant business, continued growth in Toolstation and recovery in Wickes – which had seen sales drop in 2018 in the midst of a difficult macro environment. Higher inventory levels to mitigate the impact of a no-deal Brexit led net debt to creep up, not helped by increased spending on acquisitions such as a majority shareholding in Toolstation Europe; strip these out and the debt position would have improved by roughly £45m.

Bloomberg consensus forecasts are for an adjusted EPS of 117.1p in 2020, down from 112.7p in 2019.

TRAVIS PERKINS (TPK)  
ORD PRICE:1,473pMARKET VALUE:£3.71bn
TOUCH:1,471.5-1,473p12-MONTH HIGH:1,841pLOW: 1,164p
DIVIDEND YIELD:3.3%PE RATIO:30
NET ASSET VALUE:1,024p*NET DEBT:69%**
Year to 31 DecTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20155.9422467.844.0
20166.2272.75.145.0
20176.4329093.146.0
20186.74-49.4-34.447.0
20196.9618148.948.5
% change+3--+3
Ex-div:2 Apr   
Payment:13 May   
*Includes intangible assets of £1.69bn, or 671p a share **Includes lease liabilities of £1.41bn