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03 Aug 2021
H121 postview (+15 questions for management)
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H121 postview (+15 questions for management)
Travis Perkins plc (TPK:LON) | 728 0 0.0% | Mkt Cap: 1,546m
- Published:
03 Aug 2021 -
Author:
Bromehead Yves YB | Roger Paul PR -
Pages:
9
Summary of H121 results
Travis Perkins'' H121 Adj. operating profit (before property profits) reached GBP147m, missing consensus expectations by -2%. The miss was driven by a lower-than-expected contribution from Toolstation and higher central costs, partially offset by stronger Merchanting margins. However, the latter benefited from GBP8-10m of provision reversals, suggesting the miss would have been closer to 8% in H121 vs. consensus underlying profit expectations.
Key news
Management upgraded its FY21 operating profit guidance to GBP310m from GBP300m on the back of higher-than-expected property profits. Excluding these, the guidance remains unchanged and implies consensus could revise its trading profit ex. property towards GBP280-285m from GBP296m pre-publication. On the positive front, volumes are well positioned to grow further medium-term amidst a robust construction outlook driven by buoyant RMI trends. The group reinstated its dividend policy with a 30-40% pay-out ratio with the potential to increase this further with the CMD likely to focus on sustainably higher capital returns.
Earnings
We trim our FY21 EBITA ex-property profits by -5% on the back of lower than previously anticipated margins in the Merchanting division. However, we turn more positive on FY22 margins and now expect a slight expansion vs. our initial forecast of margins coming under pressure.
Rating and target price
We reiterate our Outperform rating and increase our TP by +2% to GBp1,950/share.
Investment case
A successful turnaround story with attractive FCF generation and a capital return focused mindset.