Travis Perkins expects slow recovery in large housebuilding, construction projects

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Travis Perkins PLC (LON:TPK) said local trade activity has recovered well but its trade businesses overall continues to experience a lag in recovery from larger housebuilding and construction projects.

The builders’ merchant said there are signs of increasing workflow across these sectors as underlying demand strengthens, with businesses adapting to new ways of working so they can keep sites open during local lockdowns.

READ: Travis Perkins upped to buy as Jefferies says firm clearly exposed to UK construction sector growth

Based on the assumption that current volume trends continue and no significant impact from further lockdowns, the group said it expects full-year underlying earnings (EBITA) to be in the upper half of market expectations of £222mln-£261mln.

In a trading update for the three months to September 30, 2020, Travis Perkins said like-for-like revenue advanced by 4%, with merchanting down 3%, toolstation and retail up 25% and 18% respectively.

At period-end the retailer had £580mln of cash on deposit with an undrawn revolving credit facility giving overall headroom of £980mln.

“We expect the Wickes demerger and Plumbing & Heating disposal to create value – Wickes should trade at a premium multiple to the group – and give Travis Perkins a very strong balance sheet,” analysts at Liberum Capital said in a note to clients.

“The high free cash flow yield is also appealing, especially given the group’s demonstrably strong cash generation in the year to September.”

Shares rose 3% to 1,250.66p on Thursday at the opening bell.

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