Travis Perkins' share price heads south as profits plunge

 
Helen Cahill
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Construction Industry Boosts Economy Despite Cap On Affordable Housing
Travis Perkins has been forced to axe jobs and branches (Source: Getty)

Travis Perkins' share price has dropped by 8.5 per cent today after the builders' merchant's profit slumped and it fired a warning-shot about the UK economy.

The figures

In the year ending 31 December, Travis Perkins' profit before tax slumped 67 per cent, down from £224m to just £73m. Like-for-like revenues grew 2.7 per cent, up from £5.9bn to £6.2bn.

But, the business said it had "confidence" in its cash generation, increasing its full-year dividend by 2.3 per cent to 45p per share.

Why it's interesting

The profit cut for Travis Perkins comes as it tries to revive its plumbing and heating business. The company restructured this division in 2014 and 2015, but today said that its performance was "unsatisfactory" (revenue fell by 0.9 per cent) and that more work was needed to bring it back to good health. However, Travis Perkins has been battling structural changes in the plumbing industry and said the market conditions could get worse this year.

Read more: Travis Perkins to close 30 UK branches and axe 600 jobs

The builders' merchant also struck a gloomy note on the UK economy, warning that sterling's devaluation was pushing up costs, and that a squeeze on discretionary spending may put people off buying kitchens and bathrooms - which make up 10 per cent of the company's sales.

What Travis Perkins said

John Carter, chief executive, said: "The macro-economic outlook for the UK is mixed. The sharp decline in the value of sterling since June 2016 has created cost pressures on imported goods and materials, and the expectations for the secondary housing market transactions and growth in the RMI market have weakened.

"We have a proven track record of managing our cost base and took decisive action in October 2016, announcing a restructuring programme to close underperforming branches and improve supply chain efficiency."

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