Travis Perkins shares slide as building site closures hit profit
Shares in Travis Perkins dropped this morning after the builders’ merchant reported a huge decrease in operating profit for the first half.
The figures
Travis Perkins reported revenue of £2.8bn in the six months to the end of June, down 20 per cent on the same period last year.
Adjusted operating profit plunged 80 per cent from £220m to just £42m.
Net debt reduced from £414m to £22m.
Adjusted earnings per share fell from 56.5p to 1.4p.
Why it’s interesting
The figures highlight the stark challenge to Travis Perkins as building sites across the country were shuttered due to the coronavirus outbreak.
The builders’ merchant saw sales drop 20 per cent on lower demand, which in turn sparked a sharp fall in profitability.
Travis Perkins also booked higher costs relating to holiday pay, slow moving stock, rebates and timing of customer credit account settlement.
The company said its merchant network began to reopen in May and June to support the early recovery of the UK construction industry.
Its retail locations, which include Wickes and Toolstation, began to reopen in late May.
Travis Perkins said its end markets had begun to recover – especially in DIY markets. However, it warned of a slower return to normal levels in housebuilding and major commercial projects.
Shares in Travis Perkins were down more than seven per cent in early trading.
In June the group announced it would shut 165 branches and cut 2,500 jobs — equivalent to roughly nine per cent of its workforce — in a bid to manage costs.
The firm said these actions were expected to save roughly £120m per year with a one-off cost of £111m.
Travis Perkins warned of significant uncertainty in the short-term and urged the government to provide support for the UK construction industry.
The company said it would not pay an interim dividend.
What Travis Perkins said
Chief executive Nick Roberts said: “Although our financial performance in the first half of 2020 was impacted by the Covid-19 pandemic, and we have had to undertake a restructuring programme in light of the challenging outlook for the group’s end markets, we have made significant strategic and operational progress against the four strategic priorities we outlined at our full year results in March 2020.
“Although considerable uncertainty around the impact of the Covid-19 pandemic remains, the actions we have taken to adapt and innovate in our businesses mean that the group is well placed to continue to service our customers, support our colleagues, outperform our markets and generate value for our shareholders.”