Weak performances in plumbing and heating saw builders merchant Travis Perkins PLC (LON:TPK) report a fall in 2016 earnings, and the group is cautious on the year ahead as the Brexit uncertainties impact the UK housing market, sending its shares over 6% lower.
The FTSE 250-listed group saw its adjusted operating profits fall by 1% to £409mln for the year to December 31, down from £413mln in 2015, and lower than the consensus forecast of £410mln, having warned on profits and instigated a review of the plumbing and heating division back in October
The profits decline came even though Britain's biggest supplier of building materials saw its revenues increase by 4.6% to £6.217bn, up from £5.942bn in 2015.
The group, which runs over 20 businesses including Wickes, BSS, Toolstation and Tile Giant, cautioned that the macro-economic outlook of the UK is mixed.
John Carter, the group‘s chief executive officer said: “The sharp decline in the value of sterling since June 2016 has created cost pressures on imported goods and materials, and the expectations for secondary housing market transactions and growth in the repair, maintenance and improvement market have weakened.”
He added: “We enter 2017 with a strong balance sheet and will continue to invest selectively in our leading businesses to further strengthen our competitive advantages which will enable us to continue to outperform and drive shareholder value over the medium term."
Travis Perkins’ shares topped the FTSE 250 fallers list in early trading, dropping over 6%, or 97p to 1,468p.
In a note to clients, analysts at Liberum Capital said: “Pricing looks robust and volumes sluggish, consistent with our expectations, but the outlook is especially cautious on Contracts and Plumbing & Heating.”
However, they repeated a ‘buy’ rating on the stock, pointing out: “Shares on 13x 2017E PER, which looks cheap for those prepared to look through post referendum slowdown.”
The firm hiked its 2016 dividend by 2.3% to 45p a share, up from 44p in 2015.
-- Adds share price, broker comment --