Shares in builders’ merchant Travis Perkins (TPK) rallied 6% to £14.03 after reporting more first half sales and earnings momentum being driven by operational improvements.
But the more interesting news surrounds Wickes, its largely consumer DIY chain. Management have confirmed plans to spin-out the business to shareholders over the next 12 months as part of ongoing plans to simplify the core Travis Perkins business, and ‘enhance value for shareholders’.
Wickes has been slowing improving and management now believe it capable of ‘thriving as a stand-alone business’.
For example, the Retail business, which is principally Wickes and which makes up a quarter of sales, saw a 10% increase in like-for-like turnover in the half thanks to milder weather in the second quarter, good DIY demand including Kitchens & Bathrooms, new ranges and better availability of stock in its stores.
Investors will have to wait for more concrete details on the Wickes de-merger.
OVERALL PROGRESS
Overall revenues for the six months to 30 June were up 8% on a like-for-like basis to £2.77bn while adjusted operating profits were up closer to 15% on a similar basis to £195m thanks to a better sales mix and a leaner cost base.
The Merchanting business continues to gain market share while the recovery at Wickes goes from strength to strength and Toolstation saw ‘continued excellent growth’ to quote chief executive John Carter.
READ MORE ABOUT TRAVIS PERKINS HERE
The long-term fundamentals of Travis’s end markets remain sound, with growing demand for housing across the UK and continued under-investment in the repair, maintenance and improvement of the existing (and increasingly ageing) housing stock.
The core Merchanting business, which makes up over two thirds of sales, grew turnover by 6.4% on a like-for-like basis in the first half despite poor weather in the first quarter, although the firm does caution that it saw a ‘slowing of the underlying trade market’ in June.
The Toolstation business, which makes up the remainder of sales, grew turnover by 17% on a like-for-like basis in the first half thanks to new products and an increase in online orders. On top of organic growth management is rolling out more stores across the UK with 60 new openings planned this year.
Along with the disposal of the Plumbing & Heating business, Travis’s self-help measures are delivering better growth and lower costs. Add in the spin-off of Wickes to shareholders, however that may happen, and today’s pop in the shares is understandable.
