Yet another profit warning

In an ad-hoc press release, Travis Perkins has announced its Q3 FY23 trading performance (-1.8% lfl) and issued a profit warning for the full year – FY23 adjusted EBIT is now guided at £175-195m (vs £240m previously). Weak trading in September and commodity price deflation are likely to dent the near-term performance. However, the fundamentals are still sound and TP should rebound from the H2 FY24. We will reduce our target price by 7-10% but the valuation remains attractive at the current level

H1 FY23: Toolstation stays strong; margin headwinds to ease gradually

While Travis Perkins continues to perform well in the Toolstation business (volume growth and market share gains), the Merchanting segment remains a mixed bag. Given the profit warning of mid-June 2023, the weakness in the UK residential segment came as no surprise. We expect the inflationary headwinds and margin pressure to ease in H2 FY23. The management reiterated its annual operating profit guidance which is a reassuring for market sentiment. We maintain our positive recommendation.

First read: no major surprises in H1; Toolstation remains robust!

Travis Perkins’ Q2 and H1 FY23 performance was broadly in line with our expectations. In Q2, lfl sales declined 3.3% yoy, as the robust momentum at Toolstation was more than offset by the continued weakness in the merchanting business. Although the adjusted operating profit declined 31% to £112m, EPS was slightly below our expectations. The interim dividend of 12.5p is 12% ahead of our expectations. We maintain our positive stock recommendation.

Weaker residential demand triggers the profit warning!

Travis Perkins has issued a profit warning. FY23 adjusted operating profit is guided at £240m, which is 11% below the consensus. This is attributable to high interest rates and price inflation, which has resulted in softer than expected consumer demand in the UK’s residential segment (includes both new build housing and private domestic RMI markets). While the near-term performance remains under pressure, we do not see any structural issue with the business. We will reduce our estimates but main

No major surprises in Q1 trading!

Travis Perkins’ Q1 trading performance was slightly below our expectations. Group’s lfl sales came in at -2.9% yoy (vs our estimate of -2.0%), mainly due to the merchanting segment (-4.2% yoy). The company has launched a new proposition (called Whole House), which is targeted to capitalise its scale and knowledge with house builders. Management is comfortable with the market consensus for FY23. We do not expect any major changes in our financial estimates and target price.

Softer end to the year; 2023 unlikely to be any different!

Travis Perkins’ FY22 performance was below AV and market expectations. While lfl sales grew 6.6% yoy, volume declined by 6.0% during the year and the Group’s adjusted operating profit was 7.8% below consensus, largely due to losses in the Toolstation banner. While the management has said that it is comfortable with the 2023 consensus, we will trim our FY23 estimates to factor in continued weakness in the UK private section (new build and RMI) and in Toolstation Europe. Our positive recommendati

Decent Q3 performance; trickier times ahead!

Travis Perkins clocked a robust trading performance in Q3 FY22. The group’s lfl sales came in at +7.4% yoy, driven by the core Merchanting business (+8.7% yoy). While the decline in volume was attributable to tough comparable base, it will be increasingly difficult for management to pass on price increases to end-customers. The strong order book (claimed by large contractors) is also unlikely to be sustained. We will trim our financial estimates slightly but maintain our positive stance based on

Merchanting business leads the pack!

Travis Perkins has announced a strong start to FY22. Q1FY22 sales surged by 13.6% yoy, led by strong demand in the merchanting business (+17.9% yoy). While we acknowledge the headwinds like economic uncertainty, inflation and manufacturing costs, Travis is relatively better placed due to the growing interest in energy efficiency projects and a healthy backlog in social and economic infrastructure work. We maintain our positive stance on the stock.

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Riding on robust RMI activity

Travis Perkins continues to clock a strong performance, despite the fear of multiple macro level headwinds. While the merchanting segment led the pack in FY21, Toolstation also crossed to double-digit lfl growth. The banner should continue to expand its branch network and gradually improve the financial performance (ROCE). We expect continued strength in the UK’s RMI activity during FY22. Positive stance is maintained for the stock’s valuation.

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Robust RMI activity underpins Q3 performance; guidance raised

Travis Perkins continued to register strong sales growth in Q3 FY2021 supported by healthy demand from the RMI end-market and store network expansion. On the back of a sustained positive trading performance, management upgraded its adjusted operating profit guidance for FY2021. However, the stock came under pressure as the market focused on high inflationary pressures amidst continuing building material and labour shortages. We will revise up our estimates and target price to incorporate the Q3

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Well positioned for future success

Strong performance against tough market conditions

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