Business is booming.

Travis Perkins remains resilient amidst slump in home improvement market

Travis Perkins remains resilient despite the home improvement market slump and rising energy prices

  • Building materials seller revealed total sales grew 10.3% to £2.54 billion
  • Travis Perkins saw his Toolstation business plummet to an operating loss of £8m
  • Rising cost inflation was mainly driven by rising fuel and utility prices

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Travis Perkins has maintained steady sales growth despite rising energy costs and declining demand in the UK for DIY products.

The building materials seller revealed that sales grew 10.3 percent in the six months to 30 June to £2.54 billion, thanks to the trading division outperforming the broader market.

Orders within the specialist and general trading business of the segment delivered double-digit sales growth, driving total sales up 13.3 percent to £2.16 billion.

Recovery: Travis Perkins reported a £241m profit for 2021, compared to a £35m loss the year before when the initial lockdown severely affected the company's trading

Offload: Building materials salesman Travis Perkins revealed that sales grew 10.3 percent in the six months to 30 June to £2.54 billion. while profit rose marginally to £106 million

Another strong performance was achieved at CCF, a distributor of construction products, thanks to healthy demand from the commercial and residential sectors and effective cost management of materials such as plasterboard and insulation.

Rising cost inflation in the first half of 2022 was primarily driven by rising fuel and utility prices passed on by manufacturers rather than product shortages.

But while these factors weighed on operating margins, as well as the shift to larger customers, the trading arm’s robust overall performance helped marginally boost the group’s total profits to £106 million.

Travis Perkins Stocks were still one of the worst decliners on the FTSE 350 Index on Tuesday, falling 9.3 per cent to 934.2 pence as the Toolstation business fell to an adjusted operating loss of £8 million.

Last week, Wickes shares plunged to their all-time low after the home renovation retailer, which spun off from Travis Perkins last year, warned that the DIY market was showing ‘signs of softening’.

The Watford-based company cut its full-year profit forecast to between £72m and £82m after seeing first half revenues rise just 0.8 percent from the same time last year.

Loss: Travis Perkins said its Toolstation business declined to an adjusted first-half operating loss due to higher payroll and utility costs and large amounts spent on branch network expansion

Loss: Travis Perkins said its Toolstation business declined to an adjusted first-half operating loss due to higher payroll and utility costs and large amounts spent on branch network expansion

Loss: Travis Perkins said its Toolstation business declined to an adjusted first-half operating loss due to higher payroll and utility costs and large amounts spent on branch network expansion

Both Wickes and Toolstation benefited greatly from the pandemic which sparked a growing interest in DIY as Brits were forced to work remotely and try to brighten up their homes and gardens with extra savings in their bank accounts.

But since restrictions have been eased, Toolstation has seen trading refocus on its key trading clients, pushing comparable revenues down 10.6 percent year-over-year.

At the same time, margins have slipped into negative territory due to higher payroll and utility costs and large amounts spent on branch network expansion, with the European arm posting a £15 million loss.

Toolstation Europe’s annual losses are expected to be approximately double as a result of further store openings, rising digital and marketing costs and the opening of a second distribution center in the Netherlands.

The cost of this additional investment, combined with the normalization of the customer base, is predicted by Travis Perkins bosses to exceed the continued strong performance they expect from the company’s trading division in the second half of the year.

In the long term, however, Travis Perkins believes it has the potential to capitalize on many of the structural factors affecting the UK, including a shortage of new homes and deferred maintenance of certain public sector assets.

It added: ‘The need to decarbonise an aging housing stock is urgently increasing given the sharp rise in energy costs and government policies are supporting significant investment in infrastructure for road, rail and green power generation.

‘The group’s unique business portfolio is ideally placed to partner with the construction industry to deliver on this agenda.’

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