Travis Perkins shrugs off the supply chain crunch to profit from Britain’s home improvement boom
- Travis Perkins made a £241m profit in 2021, against a £35m loss the year before
- Sales at the Toolstation business have more than doubled in the last three years
- The firm forecasts trade to stay strong but expects inflation pressures to remain
Travis Perkins bounced back to profit in 2021, as sustained high demand for property renovations enabled it to offset rising building material costs.
The home improvement retailer reported a £241million profit for 2021, compared to a £35million loss in 2020 when the first lockdown severely impacted trade and led to supply chain disruption.
Total revenue surged by just under a quarter to £4.6billion as sales at its merchanting arm grew by around £750million following strong demand for home DIY improvements and new home completions.
Recovery: Travis Perkins reported a £241million profit for 2021, compared to a £35million loss the year before when the first lockdown severely impacted the firm’s trading
The group’s Toolstation business saw its revenue increase by another fifth to £761million, with sales having more than doubled over the last three years.
This helped it gain additional market share and boost its store estate across the UK and Europe by another 110 establishments last year, with at least 100 further branches expected to be added this year.
Its European business did make a £20million loss as a consequence of costs related to store expansion, but it still made a significant profit from property thanks to the offloading of its former distribution centre in Tilbury.
Travis Perkins shares were down 4.7 per cent to 1,392.5 today. After plummeting at the start of the pandemic, their value rose sharply and this continued for much of last year before falling back. The stock is now worth about 10 per cent less than it was 12 months ago.
Toolstation’s trade has also been less affected by cost inflation than Travis Perkins’ merchanting division, which saw the price of goods it sources climb by around 13 per cent in the second half of the year as a result of product shortages.
The FTSE 250 company expects inflationary pressures to remain but still forecasts stability in trade amid the normalisation of hybrid working, buoyant levels of property sales and growth in the number of housing developments.
Chief executive Nick Roberts said: ‘Whilst the rapidly recovering market created challenges around inflation and product availability, we have navigated them well to deliver an outstanding financial performance.’
Continuing growth: Travis Perkins’ Toolstation business saw its revenue increase by another fifth to £761million, meaning that its sales have more than doubled over the last three years
Under Roberts’s leadership, the company has been implementing a plan to streamline its operations, which it set out towards the end of 2018 and included goals to cut costs by up to £30million and grow its general merchanting business.
Travis Perkins originally announced its intention to demerge the retailer Wickes in 2019 as part of its strategy, though it did not complete this until April last year due to the pandemic’s emergence.
It also sold its plumbing and heating arm to investment company H.I.G. Capital, with net proceeds from the sale going towards £170million in share buybacks and a special dividend of £78.5million.
Following these actions, the firm said it was in a stronger position to expand and deliver additional returns for investors.
Yet AJ Bell investment director Russ Mould warned: ‘We’re at a big turning point in society which could determine whether Travis Perkins continues its run of good luck or not.
‘Covid and the associated lockdowns made people appreciate their homes more, which drove demand for repairs and improvements. That kept the tills ringing at Travis Perkins as tradesmen queued up for the kit needed to fix homes.
‘The backdrop for Travis Perkins is now less favourable. Plenty of people now back at work in the office means there is less focus on how the home looks. There is also pressure on family finances from rising inflation, so homeowners might put off doing those jobs around the house.’
Up and down: The value of Travis Perkins shares rose considerably for much of last year before falling back and are now worth about the same as 12 months ago