Travis Perkins remains cautious as it swings back to operating profit

Travis Perkins reported “good strategic progress” in its interim results on Wednesday, which it said was underpinned by “strong” trading performance, with continuing Group revenue rising 6.9% to £2.77bn.

The FTSE 250 builders’ merchant group said its revenue growth was 8.0% on a like-for-like basis for the six months ended 30 June, which was primarily driven by improvements in volumes.

Continuing group adjusted operating profit rose 14.7% to £195m, and adjusted earnings per share were 19.9% higher at 50.1p.

The company swung to an operating profit of £64m from a loss of £104m a year earlier, while its total profit was £12m, compared to a total loss of £148m at its interim results last year.

Basic earnings per share stood at 6.9p for the period, compared to losses of 57.2p per share in the first half of the 2018 financial year.

Travis Perkins said positive trading in its merchanting division demonstrated share gains, a strong recovery in Wickes and continued growth in Toolstation.

It reported adjusting items of £127m, including a £111m asset write off relating to the ERP replacement programme.

On the strategic front, the company said its merchant businesses benefited from simplification and more empowered branch managers.

It said the process to divest the plumbing and heating business was ongoing, and was classified as an asset held for sale.

The decision to demerge Wickes was made during the period, which the board said reflected its focus on advantaged trade businesses and the simplification of the group.

Cost actions also helped to deliver its improved financial performance, it added.

Travis Perkins said the dividend per share for the period was 15.5p, in line with the distribution paid at the interim in 2018.

“I am delighted with the progress the group has made in executing the strategy set out at the capital markets event in December 2018 - to focus on our advantaged trade businesses and to simplify the group,” said chief executive John Carter.

“The plumbing and heating sales process is well underway, and we are today announcing our intention to demerge Wickes as a separate business.

“This strategic progress has been underpinned by a strong trading period in the first half of 2019 albeit against softer trading conditions in the first half of 2018.”

Carter said the firm’s trade merchanting businesses had outperformed their markets, through continued focus on delivering “excellent” customer service, and benefitting from the “leaner, lower cost organisation” now in place.

He added that Toolstation continued to deliver “excellent” growth through proposition improvements and network expansion.

“Wickes has delivered a strong turnaround in volume and profit performance, with gains in both core DIY and through the kitchen and bathroom showroom.

“Whilst our underlying markets remain subdued, the self-help initiatives underway are supporting an encouraging improvement in performance and provide a strong platform to drive sustainable growth ahead of our markets in the medium term.

“Despite a cautious outlook for the near-term, the group remains confident in making progress across the year as a whole.”