18th Aug 2014 08:32
LONDON (Alliance News) - Liberum says it is impressed with the new management team at Travis Perkins and believes they can deliver "significant improvement to the group returns".
Liberum analyst Charlie Campbell said first-half results from the FTSE 100 building merchants has revealed an "impressive urgency in management actions to deliver rising returns as well as strengthening markets in the second quarter."
Campbell is encouraged by the pace of management's actions to meet the company's objective of leveraging its position as the UK's leading building-materials supplier to improve returns across the group.
"Management?s key measure is lease-adjusted return on capital employed, and the main target of the strategic improvement plan is to increase lease-adjusted return on capital employed by 200-300 basis points. We are encouraged that lease-adjusted return on capital employed has already increased by 100 basis points, with improvements in two of the four divisions," the Liberum analyst says.
Campbell also highlights that the first-half results, released on July 30, showed good growth despite tougher competition. The company recorded strong second-quarter growth of 8%, while two-year like-for-like sales growth has increased to 12.4% in the second quarter, up from 9.3% in the first quarter.
Liberum has cut the price target for Travis Perkins to 2,100 pence from 2,190p on the basis of a more conservative 15 times 2015 estimated earnings rather than 15.5 times. However, the price target still represents a 23% upside to the current share price.
Travis Perkins shares are trading up 1.5% at 1,711.00p.
By Neil Thakrar; [email protected]
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