Capital Access' Hot Off The Wires - The Day Ahead
Our Hot Off The Wires daily newsletter takes a look at the morning's market movements, news stories and company announcements. Don't forget to have a go at our daily trivia! Companies mentioned in this edition include: Ashtead, Travis Perkins, Watches of Switzerland, JD Wetherspoon, S&U, McColl's Retail, Hipgnosis Songs Fund, Ted Baker, Premier Foods and OnTheMarket. If you would like to be subscribed, please email us at email@example.com.
TPK OTMP SUS
10 Dec 19
LIBERUM: The 4S’s: Support Services & Special Situations - Loosening the purse strings
The UK election on 12th December could result in a Conservative majority, a Corbyn government or something in between. Voters cannot claim a lack of choice, with the Conservative manifesto offering One Nation Conservatism and Labour offering to ‘rewrite the rules of the economy’.
TPK BAB MER MTO SRP BBY COST KLR KIE MGNS RNWH FOUR AA/ ECM HSV MIND PAY RPS SMS STAF GATC HAS PAGE RWA STEM AHT HSS SDY GFTU HWDN SHI
29 Nov 19
Resilient Q3; cautious near-term outlook maintained
Travis Perkins maintained the strong momentum in Q3 FY19 – all continuing businesses, especially Toolstation and Retail, contributed to the top-line. Although, management sounded cautious about the near-term outlook, it expects the full-year performance to remain in line with expectations. Progress with the Wickes demerger is on-track, but the disposal of the P&H business has been paused amidst the uncertain macro-economic environment.
23 Oct 19
Update on the Wickes demerger
We have obtained clarity regarding Travis Perkins’ plan to demerge Wickes, the key takeaway being that the business will be spun-off as a publically-traded company by June 2020. While it remains to be seen if the separately-listed retail business would revive / perform better over time, the enhanced focus on trade-customers is likely to benefit Travis Perkins’ shareholders in the mid-term.
13 Aug 19
Strong Q2; cautious outlook for the second-half of the year
A strong Q2 19 performance by Travis Perkins was led by the improved business performance of Retail business and continued robust momentum at Toolstation. However, amidst the mixed key leading indicators of the UK builder’s merchanting and home improvement market, management maintained a cautious outlook for short-term demand. The demerger of Wickes was also announced. No material changes in our financial estimates.
06 Aug 19
Cenkos: Building & Construction
Due to a change in Analyst role, Cenkos Securities plc has suspended coverage of the following stocks (see table 1). Our previous recommendation and forecasts can no longer be relied upon.
TPK BDEV BWY BKG BVS COST CRST BBY FERG GFRD GLE KLR KIE MSLH MER MTO NXR PSN RDW RNWH SFR SHI MGNS TW/ CTO TEF
31 Jul 19
LIBERUM: Morning Comment
GetBusy CEO Video, Capital Goods vs Semiconductors Video, L'Oreal, Infineon, Next, Umicore, Air France KLM, BBA Aviation, Ontex, Keywords, Mitie Group, 4imprint Group, Serco, Market Highlights
TPK GETB OR IFX NXT UMI AF BBA ONTEX KWS MTO FOUR SRP WKL STM TW/ JE/ AMS OSR MELE MAB INTU RCDO SLP DFCH
31 Jul 19
LIBERUM: Best of the Week: Analyst Best Ideas, Ceres Power Initiation, Early Cycle Indicator, Mining Restocking Indicator
The week's most insightful research and ideas. Liberum's most insightful and high-value research and commentary published this past week.
TPK CWR SKFB SU IMI RIO GLEN AAL VCT UMI UTG BHP CRDA
05 Jul 19
LIBERUM: Travis Perkins - Still seeing 20% upside in spite of IFRS 16 changes
We have taken this opportunity to revise our estimates as we move onto the IFRS 16 basis. We have done this ahead of H1 results as the company has provided the market with sufficient divisional information to rework the model fully.
28 Jun 19
UK construction demand remains mixed with longer-term commercial investment projects hampered by Brexit uncertainty and, despite a commitment to end public spending austerity, the delay in civil works as central government time is diverted to Brexit negotiation/debate and, latterly, the selection of a new Prime Minister. Residential RMI (Repair, Maintenance, Improvement) demand remains, on the whole, anaemic but this disguises pockets of growth such as domestic landscaping, which explains much of our positive EPS revisions for Marshalls over the last 12 months. We think that a gradual increase in real earnings growth from mid-2019, as forecast by the Office of Budget Responsibility (OBR), and a potential recovery in consumer confidence post an orderly Brexit (or post remaining in the EU!) could catalyse a revival in the RMI sector. This would be positive for the EPS revisions of small companies such as Epwin and Michelmersh, both of which derive 50%+ of revenues from residential RMI demand. The residential new build sector continues to expand with the demand for new housing, in our view, underpinned by the government’s Help to Buy incentive scheme.
TPK BREE HWDN MSLH PLP SHI TON
10 Jun 19
LIBERUM: UK Small & Mid Cap Dispatches
Support Services - The 4 S's, DMGT, Galliford Try, CapCo, Spirent, Lookers, Equiniti, SMID Market Highlights
TPK GFRD CAPC SPT LOOK AA/ BAB BBY COST CPP EQN FOUR GFTU HSS HSV HWDN KIE KLR MGNS MIND MTO PAGE PAY RPS SMS STAF STEM XPS AHT ECM HAS RWA SRP SHI SDY SNN DMGT
31 May 19
LIBERUM: Morning Comment
Support Services - The 4 S's, Outdoor Agencies Video, DMGT, Galliford Try, Mining Update, CapCo, Spirent, Lookers, Equiniti, Market Highlights
TPK DEC SAX GFRD CAPC SPT LOOK EQN AA/ BAB BBY COST CPP FOUR GFTU HSS HSV HWDN KIE KLR MGNS MIND MTO PAGE PAY RPS SMS STAF STEM XPS AHT ECM HAS RWA SRP SHI SDY SNN DMGT
31 May 19
Strong momentum sustains in Q1
Despite a solid start to the year (7.3% lfl sales growth), Travis Perkins has left investors guessing by not upgrading its full-year guidance of stable operating profit. Management has opted to wait for at least one more quarter, considering the macro-economic uncertainties in the UK. While we have improved the FY19 top-line growth estimate (following a strong Q1 performance), this momentum is not sustainable for the rest of the year. Our stock recommendation is likely to be maintained.
09 May 19
LIBERUM: Travis Perkins - Raised TP after good start and optionality from disposals
Travis Perkins has reported a strong start to the year with like-for-like sales growth of +7.3%, helped by an easy comparison against a wet and cold start to 2018. Merchants achieved growth of 11%, with core merchanting seeing some early benefit of improved service levels.
08 May 19
A strong end to FY18 led by the Wickes recovery
Travis Perkins ended the FY18 on a strong note. While all businesses clocked strong lfl sales growth, the key highlight was the return of Wickes (DIY banner) into positive territory. Management has guided for a stable FY19 operating profit, despite the expected higher inflationary cost pressures. We will revise our estimates upwards.
27 Feb 19
LIBERUM: Travis Perkins - Encouraging FY results
Travis Perkins’ FY results came in ahead of expectations, with PBT up 1%, 7% better than expected. The beat was driven by better than expected interest as well as an improved contribution from Consumer after a strong fourth quarter.
26 Feb 19
Focus shifts to trade banners
Travis Perkins conducted its Capital Markets Day last week. Although management remains confident about the company’s long-term growth fundamentals (led by the continued housing shortage in the UK and underinvestment in maintenance of ageing house stock), it sees some challenges in the short term. Put in context, the business has become quite complicated over the past few years, as the group’s expenses (driven by investments to grow the business) increased ahead of revenue in some areas. While some businesses (e.g. Contracts and Toolstation) have consistently performed well during the period, the company has been struggling in domains like Wickes, General Merchanting, etc. Even though some of this slump has been attributable to external factors (e.g. the slump in RMI activity post the Brexit referendum, formation of buying groups have made independent players more competitive vs national entities like Travis Perkins), the internal challenges have also contributed to the increased complexity / slower decision making / margin pressure / inadequate return of capital employed, etc. THe following are the key remedial measures announced in this regard: 1. Focus on trade customers 2. Divest the Plumbing & Heating division 3. Improve the performance of Wickes’ business before reviewing other options in the medium term 4. Generate annual cost savings of £20-30m by simplifying the group business and reducing branch and distribution cost bases. Moreover, management expects the group’s FCF to strengthen over the medium term, driven by improved earnings and lower capital expenditure.
13 Dec 18
LIBERUM: Travis Perkins - cost reduction and recycling capital
Travis Perkins' strategic update at today’s Capital Markets Day says that it will sell the Plumbing & Heating division and seek to revitalise profit growth in General Merchanting by streamlining management layers to save £20- 30m per annum, while also empowering branch managers to enable better market share momentum. The cost savings should enable profit progress even in a dull market, while the successful sale of Plumbing & Heating (perhaps for £400-500m) should mean that capital can be recycled into more profitable businesses. The shares look cheap on a FCF yield of over 10%, especially as management is aiming to drive free cash flow by improving returns and now that capex has likely peaked.
04 Dec 18
Decent Q3 results; uncertain times ahead
The company posted good Q3 numbers, especially in the three merchanting businesses. However, the strong lfl momentum is likely to soften in FY19, especially in Contracts and P&H segments. All eyes are now set on 4 December 2018, the Capital Markets Day of Travis Perkins. A convincing performance turnaround plan would be the next key growth trigger in our opinion. Hence, we maintain the stock recommendation, despite the stock’s valuation being very attractive at current levels.
25 Oct 18
LIBERUM: Travis Perkins - On track to hit full year consensus
Travis Perkins has reported Q3 like-for-like sales growth of 4%, in line with expectations and the growth achieved in H1. As in H1, the three merchanting divisions achieved good growth (+7% l-f-l) with Group progress held back by Consumer (-4%). Management is confident that revenues and progress on cost reduction should ensure that consensus expectations for the full year are met, and also notes a degree of moderation in pricing pressure in Wickes. The shares are extremely unloved here and look very cheap, on 5.5X ev/ebitda 2019E. The shares are likely to perform better in advance of the CMD on 4 December.
23 Oct 18
LIBERUM: Mountain or Molehill in H2 – Pan-Europe
In a bid to leave full-year estimates unchanged, management will often cite a higher H2 weighting after a miss at the interims. Conversely, we often see prudence after a strong H1, with analysts reluctant to upgrade numbers. The ‘anchoring’ around the full-year estimates can lead to companies facing either mountains or molehills in H2. Last year, Rotork and Rightmove were identified prior to warning and beating, respectively, (PDF). In this screen we search for further possible ‘warners’ – both positive and negative – focussing on 2018E H2 EPS weightings vs. their five-year median. AB InBev and Spirent Communications face tougher H2s than usual but are rated Buy by Liberum. Conversely, IAG, Publicis and Travis Perkins look well-placed to exceed full-year expectations.
TPK ABI AZN ASML GIVN SPT VIV CARLB DOM GSK IAG PAGE PSON PUB SCHP SHP ULVR
02 Oct 18
LIBERUM: Mountain or Molehill in H2 – UK Small & Mid Cap
In a bid to leave full-year estimates unchanged, management will often cite a higher H2 weighting after a miss at the interims. Conversely, we often see prudence after a strong H1, with analysts reluctant to upgrade numbers. The ‘anchoring’ around the full-year estimates can lead to companies facing either mountains or molehills in H2. Last year, Rotork and Rightmove were identified prior to warning and beating, respectively, (PDF). In this screen we search for possible ‘warners’ - both positive and negative - focussing on 2018E H2 EPS weightings vs. their five-year median. SIG and Spirent Communications face tougher H2s than usual yet Liberum analysts rate both highly. Conversely, Domino's Pizza, Page Group and Travis Perkins look well-placed to exceed full-year expectations.
TPK SHI SPT DOM PAGE ROR RMV
02 Oct 18
LIBERUM: Travis Perkins - Why it could be darkest before dawn
Travis Perkins’ shares are oversold, never more unloved and highly undervalued. The night is likely to prove darkest before dawn as cost savings improve H2 results in General Merchanting and Consumer; Plumbing & Heating recovery continues; and, Contracts’ growth resumes. The shares offer compelling value here, especially the 10% FCF yield. We maintain our Buy rating and see over 30% TSR upside to our unchanged target price of 1525p.
02 Aug 18
Profitability slump is unpleasant surprise
Travis Perkins has reported poor H1 FY18 results. Although the top-line grew strongly (+4.2% lfl growth; 5.9% in Q2 FY18), the group’s profitability came in below our as well as the street’s estimates. Group adjusted operating profit excluding property profits slumped c.12% in the period. The downfall was largely attributable to the sales mix, weaker K&B showroom sales in Wickes and higher operating costs in the General Merchanting business. The company has charged £246m goodwill impairment for the business. Management expects challenging market conditions to persist and anticipates FY18 EBITA to come in at the lower range of analysts’ expectations (£360–390m). Also, it has commenced a comprehensive review of the Wickes business and will share details at the CMD in early December.
31 Jul 18
LIBERUM: Travis Perkins - Lowered guidance on weakness in Wickes
Travis Perkins has reported H1 PBT down 5% to £167m (Lib E £169m), with revenue up 4% (4% l-f-l, Lib E 3%), and operating margin down from 5.9% to 5.3% as overheads rose in support of business development and gross margin slipped due to mix in Plumbing & Heating and less kitchens at Wickes. Although results looked close to estimates, property profits of £17m were around £10m up on last year. Profits were broadly as expected in the trade divisions, but Wickes had another weak half with EBIT down 36% to £29m, with weakness in kitchens and bathrooms again. Management is guiding down estimates to the lower end of the range of expectations, which should mean consensus PBT falling around 4%. The shares look very good value on a FCF yield of around 9%, but the surprising weakness in Wickes is likely to depress the shares until profitability stabilises.
31 Jul 18
LIBERUM: Travis Perkins - Mixed Q1 and determination for 2018
Travis Perkins’ Q1 sales growth was a little better than expected at +3.0% compared to our estimate of +1.8%. The General Merchanting and Contracts divisions were broadly flat as expected, impacted by weather, while Consumer was considerably worse than expected and Plumbing & Heating much better. Management is confident of achieving expectations in 2018 and has signalled a determination to adjust costs further if necessary to achieve this. We see a compelling case for the contrarian here with over 20% TSR upside, driven by cheap valuation on 11x PER and 9% FCF yield.
27 Apr 18
LIBERUM: Building Materials and Housebuilders - Trading updates ahead
Three of the biggest sector constituents are expected to report next week. We expect Persimmon and Taylor Wimpey to report resilient sales rates, maintaining the momentum seen at the start of the year. The first-time buyer remains highly motivated and active as it is still cheaper to buy than to rent, especially with Help to Buy. Housebuilders' performance should improve as weak sentiment is surprised by the continued resilience of trading, combined with unstretched valuations – we prefer the smaller housebuilders. We expect Travis Perkins’ Q1 like-for-likes to be impacted by weather, but full year estimates should still be achievable, making this a compelling stock for contrarians.
TPK PSN TW/ HWDN GFTU MSLH PLP BDEV SHI TYMN
20 Apr 18
LIBERUM: Travis Perkins - Compelling case for the contrarian
Travis Perkins’ shares are at five year lows and analyst sentiment is very depressed. We think the shares’ valuation is now highly attractive and can see a compelling investment case for the contrarian. Disappointments in the results should unwind fast and highlights were overlooked. The outlook is stable not catastrophic and might actually brighten as real wage inflation turns positive again. We see over 20% upside to our revised target price of 1525p.
23 Mar 18
Good Q3 results; earnings likely to soften gradually
Travis Perkins clocked strong lfl revenue growth in Q3. The Merchanting business (General Merchanting, P&H and Contracts segment) was up 4.7% yoy, led by strong growth momentum in Contracts. However, the consumer business slowed due to a subdued performance in Wickes. The ongoing momentum in Merchanting is likely to last for a few more quarters, but macro-economic headwinds (tighter credit availability + negative real wages) should soften the growth gradually. No change in our stock recommendation.
10 Jan 18
Decent quarterly results; not much hope from P&H turnaround plan
Travis Perkins ‘TP’ reported better lfl revenue growth (2.7% vs our estimate: 1.5%) in Q2 FY17, on the back of a strong performance in Contracts (+6.4% yoy; contributed c.21% to group revenue) and Consumer divisions (+6.5% yoy; contributed c.25% to group revenue). The growth was largely driven by improved customer propositions and the benefit of recent investment in the business. The General Merchanting ‘GM’ division was up marginally (0.3% yoy; contributed c.33% to group revenue), impacted by the company’s trading stance of preserving profit margins by passing on input cost inflation. The Plumbing & Heating (P&H) division remained in the red (-1.9% yoy; contributed c.21% to group revenue), due to a continued decline in social housing demand and reduced trade with a major customer. In H1 FY17, the group’s lfl revenue was up 2.7% while reported revenue advanced by 3.5%, underpinned by the scope impact (11 Benchmarx and 24 Toolstation branches opened during the period). Despite the stable gross margin (due to improved pricing activity to recover input cost inflation), the H1 FY17 adjusted operating profit slumped by 2.1% to £190m (in line with our estimate), impacted by a challenging P&H business (profitability down c.32%) and investment in store refitting and IT capability. The management outlined the next leg of the transformation plan for the ailing P&H division (further details in the analysis section). It also declared an interim dividend of 15.5p per share (+1.6% yoy) and maintained the FY17 guidance – effective tax rate: 20%, capex: £170-190m, property profits: c.£20m, finance charge: comparable to FY16. The management also remains cautious on the trading performance for the remainder of the financial year, largely due to mixed macro-economic indicators.
11 Aug 17
Uncertain times ahead
Travis Perkins reported its Q1 FY17 trading update slightly ahead of our estimates. Lfl revenue increased by 2.7% (vs Q4 FY16: +2.5%, Q3 FY16: +2.0%; AV estimate: +1.6%), on the back of strong pricing activity at the group level and a solid performance in the Contracts business (+12.1% vs Q4 FY16: +9.2%, Q3 FY16: +5.7%; AV estimate: +3.0%; c.20% of group revenue). The segment’s growth was led by strong new build volumes and soft comparables (+2.1% in Q1 FY16). Plumbing & Heating (-1.1% vs Q4 FY16: -2.7%, Q3 FY16: -4.1%; AV estimate: -3.0%; c.22% of group revenue) and the Consumer segment (+2.9% vs AV estimate: +5.5%; -3.0% lfl impact of Easter falling in Q2 this year) also clocked satisfactory results. However, General Merchanting was down 0.3% (vs Q4 FY16: +0.3%, Q3 FY16: +0.6%; AV estimate: +1.0%; c.33% of group revenue), largely due to subdued demand and tough comparables (+4.7% in Q1 FY16). The reported revenue was up 4.9% (vs FY16: +4.6%; AV estimate: +2.9%), on the back of a +0.6% scope effect and +1.6% calendar day impact. Management remains watchful about the UK RMI market and expects to meet the FY17 guidance (capex of £170-190m, interest charge of c.£28m and 20% effective tax rate).
29 Jul 17
Good results but uncertainty lies ahead
Travis Perkins reported FY16 results slightly ahead of our estimates. The lfl revenue increased by 2.7% (vs FY15: +3.8%; our estimate: +2.5%), largely driven by the strong performance in the Consumer (FY16: +6.4%, FY15: +5.3%, our estimate: +6.5%; led by Wickes and Toolstation) and Contracts divisions (FY16: +5.0%, FY15: +8.5%; our estimate: +3.5%; led by market share gains in the heavy civils and drainage market). The organic revenue growth in the General Merchanting division came in at +1.7% (vs FY15: +3.8%; our estimate: +2.0%), but the Plumbing & Heating division continued in the red (FY16: -1.6%, FY15: -1.4%; our estimate: -1.5%), on the back of subdued demand from the social housing replacement market and intensifying competition from online/fixed price merchants. The reported revenue was up 4.6% (vs FY15: +6.5%; our estimate: +4.8%), largely due to a +1.6% scope impact (net 25 branches opened during the year). The adjusted operating profit came in at £392m (vs our estimate: £384m), however, an impairment charge of £235m reduced the net profit to just £14m. A final dividend of 29.75p per share was proposed, taking the full year amount to 45p (+2.3% yoy). However, the company remains cautious about the UK outlook (anticipating higher cost price inflation, subdued consumer discretionary spending and lower secondary housing transactions). For FY17, management expects capex of £170-190m, an interest charge of c.£28m and a 20% effective tax rate.
08 Mar 17
P&H remains a concern; core business remains strong
Travis Perkins reported Q3 FY16 trading update below our estimates. Lfl revenue came in at 2% (vs our estimate: +3.4%; Q2: +2.3%, Q1: +4.2%), largely due to the softer market conditions in the General Merchanting business (+0.6% vs our estimate: +3.5%; Q2: +1.1%, Q1: +4.7%). The ongoing slump in the Plumbing & Heating business (-4.1% vs our estimate: +1.0%; Q2: -1.4%, Q1: +2.2%) further dragged down the top-line. However, the Contracts business sustained the strong organic growth momentum (+5.7% vs our estimate: +3.0%; Q2: 3.1%, Q1: 2.1%; c.20% of group revenue), whereas, the continuing investment in enhancing the range and store refitting (12 Wickes stores refitted in Q3; bringing the total to 50) propelled the consumer business to 6.3% lfl growth (vs our estimate: +6.5%; Q2: 6.4%, Q1: +7.3%; c.23% of group revenue). Total reported revenue increased by 3.4% (vs H1 16: 5.8%; our estimate: +4.9%), largely due to a +1.4% scope impact (net 23 branches opened during the quarter). Management guided FY16 adjusted EBITA to come in at slightly below current market consensus of c.£415m (our estimate: c.£407m). Additionally, 10 distribution centres and over 30 branches (including 15 Travis Perkins and 13 Plumbing & Heating branches) will be closed in the wake of uncertain consumer demand (post Brexit) and to enhance the supply-chain efficiency further. The company has also initiated a thorough review of the ailing Plumbing & Heating business and will discuss the results of this in mid-2017.
03 Jan 17
Brexit impedes quarterly growth; value shifts in the out-years
Travis Perkins (TP) reported H1 FY16 results below our estimates. The lfl underperformance (+3.1% vs our estimate of +4.6%; Q2: +2.3%, Q1: +4.2%) was largely due to weak consumer demand in the wake of the Brexit referendum (deferment of projects by some large-scale contractors) and strong comparables (Q2 FY15: +6.3%). General Merchanting clocked an lfl growth of +2.9% (Q2: +1.1%, Q1: +4.7%; c.33% of total sales) due to lacklustre demand for heavy-side products during May and June. Plumbing & Heating was up 0.4% (Q2: -1.4%, Q1: +2.2%; c.23% of total sales), facing continuing pricing pressure in the end markets (particularly contract installers) and deflation in some of the product categories (mainly copper, steel and plastic tubing). However, the Contracts segment continued positive growth momentum of +2.7% (Q2: +3.1%, Q1: +2.1%; c.20% of total sales) on the back of business wins. Also, the growth in the Consumers segment came in at +6.5% (Q2: +6.4%, Q1: +7.3%; c.23% of total sales), propelled by a solid performance from refitted Wickes stores (currently 32 new-format stores out of 236 shops). The total reported revenue met our expectation at 5.8% growth, benefiting from the scope effect (+1.9%; net 14 new branches opened) and an additional trading day (+0.8%). The EBITA margin (excluding property profits) declined by 10bp yoy to 6.1% (60bp below our estimate). The operating leverage achieved in General Merchanting division was offset by pricing pressure in the Plumbing & Heating segment and the expansion of low-margin CCF branches. During H1, the company incurred capex of £120m (planned £200m in FY16) and declared an interim DPS of 15.25p (+3.4% yoy). Furthermore, management guided for a better Q3 (largely on the back of weak comparables), but remains apprehensive about short-term growth in the end markets due to expected sluggishness in the RMI, new construction and infrastructure spending amidst the Brexit uncertainties.
07 Oct 16
Better RMI accelerates growth; Brexit might spoil the party
Travis Perkins released its trading update for Q1 16, slightly below our estimates and ahead of market consensus. The lfl revenue was up 4.2% (vs Q4: +1.4%, Q3: +2.6%, H1 15: +5.7%) on the back on better RMI activity; new space addition further propelled total revenue growth to +5% (+6.2% on a comparable days basis) vs our estimate of 6.9%. - General Merchanting: Lfl revenue was up 4.7% on the back of growth in the Benchmarx business, heavyside categories and timber (further supported by investment in new range centres). - Contracts: Lfl growth moderated to +2.1% due to strong comparators in Q1 15 (+15.1%; although a better performance qoq, Q4 15: -1.9%). The conversion of 13 Keyline branches to the Travis Perkins brand in January eroded segment revenue by 2.2%. - Consumer: The positive momentum in Wickes and market share gains (Toolstation and Tile Giant) pushed up lfl revenue by 7.3% (vs Q4: +6.1%, Q3: +2.3%, H1: +6.5%). - Plumbing & Heating: Q1 marked the inflection point for the Plumbing & Heating division following the completion of the store conversion process (PTS to City Plumbing). The lfl revenue recovered by +2.2% (vs Q4: -1.9%, Q3: +1.7% and H1: -2.9%) on account of good growth in the City Plumbing business (CPS), while sales at Plumbing Trade Supplies (PTS) remained flat. Travis opened five new Benchmarx showrooms and nine Toolstation stores during the quarter. Management reiterated guidance of 10% EBITA growth for the year.
03 May 16
Weaker RMI and commodity deflation weigh on Q4; 2016 waiting for referendum
Travis Perkins (TP) released FY15 results slightly lower than our expectations, with revenue up 3.8% on a lfl basis and 6.5% on a reported basis (vs our estimate of +7.2%) to £5,942m and adjusted EBITA of £412.6m (7.6% growth yoy vs 8% guidance). The lfl growth rate moderated to 1.4% in Q4 after 2.6% in Q3 and 5.7% clocked in H1 due to the weakness in the RMI market in the second half. However, the market has seen an uptick in demand during January and February, which management sees as sustainable and instrumental for the 2-3% growth in 2016 (see later for our view on this). In the General Merchanting business (+1% lfl in Q4 vs +1.7% in Q3 and +6.7% in H1), a strong growth in heavy-side products in H1 was partially offset in H2. Similarly, the Contracts division witnessed a slowdown in lfl growth of 1.5% (vs +5.5% in Q3 and +13.9% in H1); the good performance of Keyline and CCF businesses was offset by sluggishness in the BSS business (competitive pricing and commodity price deflation). Conversely, the Consumer division (the best performing segment) reported +6.1% lfl growth in Q4 (vs +2.3% in Q3 and +6.5% in H1), predominantly driven by strong kitchen and bathroom sales at Wickes and continued lfl growth and network expansion in Toolstation. The segment outperformed peers Kingfisher (B&Q: +4.4% lfl, Screwfix: +15.1% lfl in the quarter ended January) and Homebase (+3.3% in the quarter ended February) during the quarter. Also, the adjusted operating margin improved by 80bp yoy on the back of improved customer propositions in Wickes and Toolstation. The Plumbing & Heating (P&H) business continued to suffer from competitive pricing in the industrial plumbing market and accelerated restructuring (branch re-segmentation). The lfl revenue declined by 1.9% in Q4 (vs +1.7% in Q3 and -2.9% in H1). An impairment charge of £140.6m (PTS (£109.9m) and F&P (£30.7m) in the P&H business dented the net profit, which fell by c.35% to £167.7m during the year. Adjusted net profit for the year picked up by 10.8%, while the full-year dividend was increased by 15.8% yoy to 44p per share. For 2016, management expects to better the market growth of 2-3% by 1% and, coupled with 2% growth from new space, aims for headline revenue growth of 5-6%. Medium-term EBITA growth guidance was reiterated at 10%.
19 Apr 16
Robust growth despite Q3 blip; self-help measures give confidence on margin protection
With the blip seen in July and August across UK housing data, Travis Perkins Q3 15 trading update was no exception. Lfl sales growth moderated to 2.6% vs. 5.7% seen in H1 as demand slowed across all businesses in July and August. Nonetheless, management confirmed that it saw recovery in volumes in September and October, and expects demand to be sustained. - Sales growth in General merchanting abated to 1.7% during the quarter vs. 6.7% in H1 on the back of weaker volumes and less favourable pricing. - Consumer business grew 2.3% on a lfl basis vs. the strong growth of 6.5% witnessed in H1 as the DIY market remained challenging in July and August (reiterated as much in the Home Retail results as well). - Plumbing and heating returned to growth (+1.7%) vs. the 2.9% decline in H1 as the segment benefited from a weak comparative; however, market conditions remain tough and sales disruption is expected to continue until the end of the conversion programme (with 107 conversions done in 9M to take the total to 153 conversions of the 180 planned for FY15). - Contracts’ sales growth came in at 5.5% in Q3 as opposed to 13.9% growth in H1, with some pricing pressure In terms of outlook, due to the market weakness in the quarter, management now expects FY15 EBITA growth to be at the lower end of market expectations, i.e. close to £415m (+8% EBITA growth, from 10% guided earlier).
17 Nov 15