Construction markets are looking shaky according to Travis Perkins (TPK) as the builders merchant looks to close 30 outlets and takes a £50m one-off restructuring charge.

Shares in Travis are down 5.8% at £14.02 today – even though a third quarter update showed performance was reasonable since the UK’s vote to leave the EU. Like-for-like (LFL) sales, a measure of revenue growth from stores open one year or more, grew 2.0%.

Investors and analysts are instead focusing on an outlook statement from chief executive John Carter which says management is struggling to predict future demand and is seeking to close depots and implement efficiencies at significant up-front cost.

TPK - Comparison Line Chart (Rebased to first)

‘The third quarter trading statement confirms that LFL sales growth at 2.0% is slightly better thant the 1.5% that we had pencilled in,’ writes Panmure Gordon analyst Aynsley Lammin.

‘Plumbing and heating was much worse and the group is guiding that 2016 adjusted earnings before interest, tax and amortisation (EBITA) will be slightly below current market expectations of around £415m. Consensus numbers are likely to edge back 2-4% as a result. There is little comment on 2017 but the tone of the statement is very cautious.’

Lammin adds Travis has a relatively strong balance sheet and says the business should be able to outperform the wider industry.

‘The shares are likely to struggle until there is more visibility over trading in 2017 and solution for the Plumbing and Heating (P&H) division.’

Travis chief executive Carter said management was not satisfied with performance in P&H and is reviewing the business.

Trading at Travis’ Wickes and Toolstation, outlets which target the consumer rather than trade market, performed better. Overall growth in Travis’ consumer business was 6.3% higher on a like-for-like basis.


Issue Date: 19 Oct 2016