Travis Perkins plc - Cash generation a comfort during a challenging year

Davy Research
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A focus on cash generation and targeted restructuring measures helped Travis Perkins negotiate a challenging year. As expected, there was a steep drop in underlying trading profit (down 49% compared to 2019), but the group enjoyed a pick-up in revenues towards the end of the year (like-for-likes sales up 7.7% in Q4). The near-term priority remains on managing its way through the ongoing uncertainty and, not surprisingly, the RMI end-market continues to perform better than the commercial and housebuilding sectors. Of note is the news that the process to demerge Wickes has recommenced with a targeted completion of end-Q2. The group’s financial position is also reassuringly robust but the Travis Perkins valuation, at over 16x likely 2021 earnings, does not stand out.