Wickes owner’s shares jump on improved performance
Shares in Travis Perkins shot up on Tuesday after the Wickes owner pointed to a better-than-expected second-half performance, and despite the group falling into the red.
Figures out on Tuesday showed the builders’ merchant booked a £49 million pre-tax loss in 2018, compared with a £290 million profit the previous year.
Profits were dragged down by a £246 million impairment relating to restructuring costs.
But sales rose 4.8% to £6.74 billion and, on an adjusted basis, pre-tax profit rose 1.2% to £347 million.
Boss John Carter said: “The group delivered a solid performance overall in 2018 despite a challenging market backdrop.
“We took concerted self-help actions during the year, and the benefits of this cost reduction, together with improved trading, drove an improved profit performance in the second half of the year.”
Shares were up nearly 10% in morning trade at 1,390.5p as investors also warmed to Travis’s cost-cutting initiatives and a strong performance in the second half of the year.
In the final six months of 2018, adjusted operating profit, excluding property profits, grew by 10.7% off the back of an efficiency drive.
In December, Travis said it would offload its plumbing and heating division and extend a cost-cutting programme as it targets savings of up to £30 million amid a challenging DIY market.
The sale of its plumbing and heating arm is part of a simplification programme which will see the firm focus instead on serving trade customers.
The company also said at the time that it will “look to review the options for maximising the value” of DIY chain Wickes in the medium term, which could include a sale of the retailer.
Tuesday’s figures show that sales at Wickes declined by 2.5% in 2018, and by 4.4% on a like-for-like basis.
Travis blamed an extremely challenging DIY market, driven by the wider macro environment, declining consumer confidence and poor weather conditions in March and April.
Russ Mould, investment director at AJ Bell, said: “The stars appear to be aligning for Travis Perkins. The builders’ merchant is simplifying its structure, reinvesting cash in the best parts of the business, trading is picking up in its consumer-facing brand Wickes, and operating profit improved in the second half of the year after a difficult first half.
“This progress will go down well with the market as many had feared that Travis had lost its way over the past few years.”