Travis Perkins like-for-like sales decline eases as profit beats hopes

Travis Perkins PLC on Tuesday said it is seeing encouraging early progress in its operational turnaround as it reported better-than-expected interim operating profit.

The Northampton, England-based building materials distributor and retailer said pretax profit improved to £47.0 million in the six months that ended June 30 from £37.1 million a year prior.

Adjusted operating profit rose 6.3% to £67 million from £63 million a year before, which analysts at Stifel said was above £60 million market consensus.

Adjusted earnings per share rose 14% to 15.1 pence from 13.3p.

Travis Perkins cut is interim dividend to 4.0p per share from 4.5p, with the company saying this reflected its dividend policy of paying 30% to 40% of adjusted earnings.

Revenue edged down 1.8% to £2.26 billion from £2.30 billion, driven by a reduction in volumes in "challenging market conditions" and the prior year disposal of Staircraft, partially offset by building material price inflation.

Like-for-like sales declined 1.2% in the half-year, improving from the 2.1% decline seen a year ago, and the 1.7% decline posted in the prior quarter.

In response, shares in Travis Perkins leapt 16% to 666.50 pence each in London on Tuesday, the best performer in the FTSE 250 index.

Travis Perkins flagged encouraging early progress in expanding gross margin in its General Merchant business, said Toolstation UK is performing in line with expectations, while its Specialist businesses is showing "resilience" with weakness in the new-build market partially offset by improving demand for infrastructure projects.

Looking ahead, Travis Perkins said it is seeing encouraging early progress in its operational turnaround.

"However, the UK construction sector remains subdued with activity levels remaining depressed during the first half. In addition, given wider geopolitical and macroeconomic events, building materials price inflation remains hard to forecast."

Travis Perkins expects market conditions in the second half to be comparable to the first and as such expects a similar trading performance.

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