Travis Perkins ramps up plans to spin off Wickes - report
Builders’ merchant Travis Perkins has reportedly accelerated plans to offload its struggling Wickes DIY chain.
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The FTSE 250 company, which owns more than 20 UK businesses and 19 brands, confirmed in December it wanted to simplify its structure and improve returns. It also said it would look to strengthen the performance of Wickes in the short term, but did not rule out a sale, noting instead that it would "review the options for maximising the value of Wickes in the medium term".
According to The Sunday Times, however, plans to spin the chain out have now been accelerated, with Travis Perkins said to be separating Wickes’ IT systems from the rest of the group ahead of a planned demerger in the middle of next year.
It is also hoped that splitting the two IT systems could flush out buyers for the 240-strong chain, the newspaper reported.
It is understood that a sale of Wickes could raise between £400m and £500m but finding a buyer could prove difficult. A fall in home ownership has affected the once-booming DIY market, while the wider retail sector has been hit by weak consumer confidence. Wickes has seen operating profits fall recently, and last year annual underlying sales slid 4.4%, although they rebounded in the first quarter of the current year.
Charlie Campbell, analyst at Liberum, said: "We believe that the plumbing and heating disposal could raise around £300m and could happen before the end of the year, and that Wickes, if sold, might raise around £400m.
"Our positive investment case for Travis is based on self-help finally driving economics of scale in the general merchanting business and the optionality that could come from these disposals."
As well as Wickes and the Travis Perkins brand, the company’s other businesses include trade-focused Toolstation, kitchen specialist Benchmarx and various plumbing and heating brands.
Liberum has a ‘buy’ rating on the stock and a price target of 1,600p.
As at 1030 BST, shares in Travis Perkins were flat at 1,261p. A Wickes spokesman declined to comment on the specifics of The Sunday Times article, saying instead: "As the group stated at its capital markets update in December 2018, we continue to prioritise improving the performance of Wickes to create optionality to maximise value over the medium term."
At 1100 BST, Travis Perkins shares were up 0.2% at 1,263.50p.