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Travis Perkins lowers guidance as interims hit the nail firmly on the thumb

Published: 05:05 31 Jul 2018 EDT

Travis Perkins store
The group enjoyed "very strong growth in Plumbing & Heating"

Shares in do-it-yourself (DIY) stores owner Travis Perkins PLC (LON:TPK) fell out of bed after a downbeat outlook statement in its half-year report.

The Wickes brand owner said earnings before interest, tax and amortisation (EBITA) for the full-year are expected to be in the lower half of the range of analyst expectations, which prior to this morning’s update spanned from £360mln to £390mln.

READ: Travis Perkins repeats 2018 guidance despite hit to sales from Beast from the East

The group said the UK DIY market remains challenging and trading was badly affected by the “Beast from the East” in March and April.

Its consumer-facing brand, Wickes, did not recover from the sales hit as strongly as its trade-focused brands, with like-for-like (LFL) sales at Wickes down 7.7% in the first half of the year.

Significant cost reduction plans are underway at Wickes while other parts of the group will also see the axe swung to cut costs.

Adjusted profit before tax in (PBT) the first half of 2018 for the whole group fell 4.6% to £167mln from £175mln in the corresponding period of 2017, despite a 4.4% increase in revenue to £3.36bn from £3.22bn. LFL sales were up 4.2% year-on-year.

The adjusted PBT figure excludes a £246mln write-down in the value of the Wickes brand.

Net debt at the end of June had deepened to £461mln from£377mln a year earlier.

The interim dividend was kept unchanged at 15.5p.

The businesses serving the building trade did OK

“Our trade focused businesses in General Merchanting, Contracts, Toolstation and Plumbing & Heating achieved good sales growth despite experiencing a volatile first half. These businesses exited the period with encouraging momentum and, supported by a continued focus on cost, they remain on track to deliver modest profit growth for the full year,” said John Carter, the chief executive officer of Travis Perkins.

That was the good news …

“Our consumer-focused business, Wickes, has had a far more challenging period as weaker consumer spending trends, combined with a difficult competitive environment, have held back profitability. Consequently, the Wickes team is executing a significant cost reduction programme. Whilst these savings will help drive improved profitability through the second half of the year, Wickes’ profits will be lower than previously expected,” Carter revealed.

“Against a backdrop of changing market conditions which are expected to continue for the foreseeable future, the group has commenced a comprehensive review of its business, with a view to driving stronger performance and enhanced value for shareholders in the medium term,” Carter added.

The shares fell 10.3% to 1,202p, not helped by a downgrade to ‘hold’ from ‘add’ by broker Peel Hunt, which has downgraded its full-year forecasts by around 6%.

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