6th Aug 2024 12:24
(Alliance News) - Half-year results from Travis Perkins PLC on Tuesday were viewed as a "holding" statement, ahead of a new management team joining, but will nonetheless prompt big cuts to earnings forecasts, analysts on Tuesday said.
Travis, a Northampton, England-based builders' merchant, cut its interim dividend by more than half, as profit and revenue fell amid "challenging" market conditions.
The company used the word "challenging" no fewer than ten times in its earnings announcement to describe the state of the UK house construction and repair market.
Pretax profit dropped by 82% to GBP15.6 million in the six months that ended June 30 from GBP85.7 million a year before, as revenue declined 4.5% to GBP2.36 billion from GBP2.47 billion.
Travis said the trends seen in the second half of 2023 continued into the first half of 2024 with "weak demand" across its end markets and commodity price deflation.
"Trading conditions have remained challenging through the first half of the year and we have continued to prioritise delivering for our customers whilst also recognising that a persistently lower volume environment means that we have to deliver a simpler, more efficient business," commented Chief Executive Officer Nick Roberts.
"Whilst market conditions have impacted on our trading margin, we have made good progress on managing our overhead base and generating cash."
Adjusted operating profit fell by a third to GBP75 million in the first six months from GBP112 million a year before. Travis said it expects adjusted operating profit to be around GBP150 million for all of 2024. This would be down 17% from GBP180 million in 2023.
In response, Travis cut its interim dividend by 56% to 5.5 pence per share from 12.5p, keeping in line with its policy of paying out 30% to 40% of adjusted earnings.
Roberts will be replaced as CEO come September 16 by Pete Redfern, who was CEO of house builder Taylor Wimpey PLC until 2022.
Also joining Travis this autumn is Geoff Drabble, who will join the board as a non-executive director in October and later will take over the chair.
Drabble currently is chair of packaging firm DS Smith PLC. He also is chair of plumbing supplies firm Ferguson, whose London- and New York-listed entity recently was switched to Ferguson Enterprises Inc from Ferguson PLC as part of its shift toward the US.
Analysts at Stifel said revenue was a little light of consensus of GBP2.42 billion. Adjusted operating profit was below the GBP80 million consensus with half of the shortfall due to the timing of property profits.
Stifel pointed out like-for-like revenue in merchanting fell 6.1% over the first half, worse than the trend reported in the first quarter of 4%, with prices down 3.6% and volumes down 2.5%.
Stifel said guidance for adjusted operating profit has been cut to around GBP150 million from GBP160 to GBP180 million. This should mean a 10% cut to consensus forecasts of GBP165 million, the broker suggested.
The broker retained a 'hold' rating on Travis Perkins.
"The market appears to us to want to buy Travis Perkins for its exposure to UK residential recovery, new build and RMI. It certainly has the exposure to those sectors, but our reticence is due to concerns over execution."
Stifel noted many strategic shifts over recent years have yet to restore industry-leading profitability and market-share momentum.
"An experienced, and high calibre, management team is certainly capable of enabling this transformation, but we think that this will take time."
Travis shares were down 0.1% to 879.50 pence on Tuesday afternoon in London.
By Jeremy Cutler, Alliance News reporter
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Travis PerkinsTaylor WimpeySmith (DS)Ferguson