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(Sharecast News) - Travis Perkins reported a drop in first-half revenue on Tuesday and flat operating profits once property profits were stripped, but shares in the builders' merchants surged as analysts pointed to early signs of a turnaround.
In the six months to 30 June, revenue fell 1.8% to 2.2bn, or 0.7% on a like-for-like basis, mainly driven by the merchanting segment, where end markets remain challenging, and the comparative effect of the disposal of Staircraft, the company said.
Adjusted operating profit ticked up 6.3% to 67m, but once property profits were stripped out, it was flat at 62m. Adjusted earnings per share rose 13.5% to 15.1p.
The company said Toolstation UK is performing in line with expectations, with sales up 2.6%, while trading in Toolstation Benelux remains challenging, with sales down 6.1% during the half.
Chief executive Gavin Slark said: "I have enjoyed my first half since joining as CEO in January. I have developed a clear understanding of our many strengths, but also where we need to improve if we are to restore the group's financial performance and reach our potential.
"We have built on the operational progress made last year, with a new senior leadership team in place and a clear set of priorities. This stability and focus is serving us well as we implement further change. We have made encouraging early progress in rebuilding profitability in the General Merchant and Toolstation UK continues to perform in line with our expectations. We continue to place the customer back at the heart of the business, recognising the value of strong relationships and the importance of providing great service.
"Our financial position continues to strengthen and is providing us with the flexibility to invest where we see the best opportunities ahead of any market recovery."
At 0940 BST, the shares were up 16.8% at 669.50p.
Panmure Liberum, which rates the shares at 'buy' with a 740p price target, said the results "show early signs of the group being successfully turned around".
Analyst Adrian Kearsey said: "This performance reflected an expansion in the General Merchanting gross margin and careful cost management. This performance is being delivered within the context of a challenging macro environment.
"For example, General Merchanting volumes were down 3.9% YoY in the first half. Therefore, we continue to see self-help as the key driver for the short-term. Given the macro backdrop management expect second half earnings to be similar to those delivered in the first. Within this context, we are leaving our FY26 EBIT earnings unchanged."
Meanwhile, broker Peel Hunt, which rates the shares at 'buy' with a 660p price target, said the UK backdrop remains extremely challenging, with depressed volumes and continued operating cost pressures.
"However, the business is seeing encouraging signs regarding the turnaround," it said. "Market conditions in H2 are likely to be similar to H1, though price inflation (particularly for oil derivatives) remains a key variable. The group expects a similar trading performance to H1, which implies limited changes to the adjusted operating profit consensus of 124m (PH 115m)."
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