Travis Perkins to reward shareholders after it announces £325m sale of plumbing and heating business
- Private equity house H.I.G. Capital is buying the plumbing and heating arm
- Travis Perkins recently completed the demerger of DIY products firm Wickes
- The company’s first-quarter results showed like-for-like sales growth of 17.4%
Building materials firm Travis Perkins has declared its shareholders are in line for a payout after it revealed its plumbing and heating business is being sold.
The FTSE 250 group is selling the division for £325million to an affiliate of Miami-based private equity house H.I.G. Capital and expects to complete the transaction sometime in the next three months.
It forms part of the company’s strategy to streamline its portfolio, which it outlined at the end of 2018 and included plans to achieve £20million to £30million in cost savings and boost its general merchanting arm.
Offload: Travis Perkins is selling its plumbing and heating distribution arm for £325million
Also included in that roadmap was the goal to enhance the performance of Wickes, the Northampton-based home improvement retailer that Travis Perkins demerged last month.
The company said that thanks to its ‘strong balance sheet and robust liquidity,’ it was in a position to reward shareholders via a mix of a 35 pence per share dividend and, depending on market conditions, a share buyback scheme.
Chief executive Nick Roberts said: ‘A significant amount of work has gone into improving the P&H business over the last few years, and I am sure that the business will continue to make excellent progress under the ownership of H.I.G.
He added: ‘Following on from the demerger of Wickes in April 2021, the group has now executed the planned actions to simplify its portfolio, and the strength of the group’s balance sheet enables us to return the net proceeds to shareholders.
‘Looking forward, the Group has a bright future as the leading provider of building products in the UK, and we look forward to setting out our plans later in the summer to continue to drive growth.’
Due to the essential classification of the construction industry and higher demand for home improvement among locked-down consumers, Travis Perkins has benefited from a strong recovery in sales following a dip in the early stages of the lockdown.
Separation: Travis Perkins’s sale of its plumbing and heating distribution arm comes a month after it demerged Wickes, its Northampton-based home improvement retailer
In the first half of 2020, total sales plummeted by a fifth as builders across Britain downed tools, and national lockdowns forced the group to close branches.
During last summer, it announced that around 2,500 jobs and 165 stores would be axed as Roberts stated the firm was not expecting pre-Covid trading levels to return ‘for some time.’
Trading did pick up steam though, and following a recovery in construction activity, Travis Perkins said it would pay back £50million in business rates relief and furlough money that it received from the government.
Its most recent results covering the first quarter of the 2021 fiscal year showed like-for-like sales growth of 17.4 per cent, with revenues at its Toolstation retailer climbing 42 per cent and its merchanting business growing 15.5 per cent.
Home improvement: The UK has been undergoing a DIY boom since the start of the pandemic
Meanwhile, on a two-year measure, sales were 11.8 per cent higher, with Toolstation revenues up by two-thirds as the company experienced robust demand in repair maintenance and improvement activity.
By contrast though, B&Q owner Kingfisher has performed comparatively better than Travis Perkins.
Yesterday, it revealed first-quarter like-for-like sales rose 23 per cent to £3.4billion, with French divisions Brico Depot and Castorama all doubling their sales numbers.
The company warned though that supply chain issues, such as the cost of raw materials and shipping, would continue to affect them for at least six more months.
Shares in Travis Perkins were up 1.2 per cent to £16.36 at around midday today.