Travis Perkins Ignoring Supply Chain Crisis to Profit from Britain’s Home Improvement Boom
- Travis Perkins made a profit of £241m in 2021, down from a loss of £35m the previous year
- Sales of the Toolsstation business have more than doubled over the past three years
- The firm expects trade to remain strong but expects inflationary pressures to remain
Travis Perkins rebounded on earnings in 2021 as continued strong demand for property renovations allowed him to offset rising building material costs.
The home improvement retailer recorded a profit of £241m for 2021, compared to a loss of £35m in 2020 when the first lockdown severely affected trade and led to supply chain disruption.
Total turnover jumped by just under a quarter to £4.6bn, with sales from its trading arm rising by around £750m following strong demand for DIY improvements and completion of new homes.
Recovery: Travis Perkins reported a profit of £241million for 2021, compared to a loss of £35million the year before when the first lockdown badly affected business trading
The group’s Toolsstation business has seen its revenue rise by a fifth to £761m, with sales more than doubling in the past three years.
This has helped it gain additional market share and increase its store base in the UK and Europe by another 110 establishments last year, with at least another 100 branches expected to be added this year.
Its European business recorded a loss of £20million due to costs associated with store expansion, but it still made a significant profit on property thanks to the unloading of its former distribution center in Tilbury .
Travis Perkins shares were down 4.7% at 1,392.5 today. After falling at the start of the pandemic, their value rose sharply and this continued for much of the last year before falling again. The stock is now worth around 10% less than 12 months ago.
Toolstation’s business was also less affected by cost inflation than Travis Perkins’ merchant division, which saw the price of goods it buys soar about 13% in the second half due to product shortages.
The FTSE 250 company expects inflationary pressures to persist, but still foresees stability in trading amid normalization of hybrid work, sustained levels of property sales and growth in the number of property developments.
Managing Director Nick Roberts said: “While the rapid market recovery created challenges related to inflation and product availability, we overcame them well to deliver exceptional financial performance.”
Continued growth: Travis Perkins’ Toolsstation business saw revenue rise by a fifth to £761m, meaning sales have more than doubled in the past three years
Under Roberts’ leadership, the company implemented a plan to streamline its operations, which it set out towards the end of 2018 and included targets to reduce costs by up to £30m and expand its general trading activities.
Travis Perkins originally announced plans to spin off retailer Wickes in 2019 as part of his strategy, although he only completed it in April last year due to the emerging pandemic.
It also sold its plumbing and heating business to investment firm HIG Capital, with net proceeds of the sale amounting to £170m in share buybacks and a special dividend of £78.5m .
Following these actions, the company said it was in a better position to grow and deliver additional returns to investors.
Still, AJ Bell chief investment officer Russ Mold warned: “We are at a major turning point in society which could determine whether Travis Perkins continues his lucky run or not.”
“Covid and the associated lockdowns have made people appreciate their homes more, which has boosted demand for repairs and improvements. It rang the tills at Travis Perkins as shopkeepers lined up for the kit needed to fix homes.
“The backdrop for Travis Perkins is now less favourable. A lot of people are now back at work in the office, which means there is less focus on how the house looks. Rising inflation is also putting pressure on the family finances, so the owners could postpone these works in the house.
Up and down: Travis Perkins’ stock value rose dramatically for much of the last year before falling back and is now worth about the same as 12 months ago