28th Feb 2023 11:41
(Alliance News) - Investors were disappointed by Travis Perkins PLC's annual results, with the outlook for the FTSE 250 constituent not looking much better.
The Northampton, England-based building supplies retailer said revenue climbed 8.9% to GBP4.99 billion in 2022 from GBP4.57 billion in 2021.
Pretax profit fell 20% to GBP245.0 million from GBP305.6 million a year earlier. Its bottom line was hit by lower property profit, as well as GBP15 million restructuring charge for the fourth quarter.
Shares in Travis Perkins fell 3.6% to 1,011.00 pence in London on Tuesday.
"The company has been hit by falling demand in the commercial real estate sector amid the ratcheting up in borrowing costs and that's shown up in lower year on year profits for the property arm of the business," said Hargreaves Lansdown analyst Susannah Streeter.
"The prospects for the year ahead for this part of operations aren't that rosy given that industry-wide data has shown a decline in enquiries and worsening outlook," she added.
Still, even when excluding property profit and restructuring charges, adjusted operating profit also fell 6.3% to GBP285 million, which was 4.7% weaker than Visible Alpha forecasts of GBP299 million.
Chief Executive Nick Roberts said the firm had to make "difficult decisions" in light of the weaker trading environment of the second half. The firm made a number of cost reduction actions in the fourth quarter, including 400 staff redundancies and 19 branch closures in the General Merchant and Benchmarx.
Looking ahead, it noted an uncertain environment but was confident of another "resilient" performance, due to its cost actions, the diversity of its end market exposure, and the expansion of its market share.
"With the vast bulk of its revenues generated in the UK, coupled with continuing expansion losses in Europe, the expectation is for a further contraction in profits this year," Davy Research noted.
"Not surprisingly, however, the tone of the outlook comments is guarded," Davy added.
Travis Perkins said it expects cost inflation to moderate in 2023, while it plans for a decline in overall market volume in the mid-to-high single digit range.
"Travis is still having to grapple with some serious cost inflation. Although this will ease off, inflation at mid to high single digits will still be tricky to navigate ahead," HL's Streeter noted.
Travis' results are adding to the wider picture of a weakening UK property sector, according to AJ Bell analyst Russ Mould.
"The cracks in the property sector are becoming more like the ones you see with subsidence than hairline gaps in plaster," he said.
Also on Tuesday morning, Zoopla data showed that UK house sellers are shaving off an average of GBP14,100 off their original asking prices to achieve a sale.
Zoopla expects the "soft reset" of house prices to continue in the months to come.
"Sellers are slashing asking prices, transaction volumes have fallen on a seasonally adjusted basis, and companies serving the UK property market are bracing themselves for a tougher climate this year," Mould concluded.
By Elizabeth Winter, Alliance News senior markets reporter
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