Shares round-up: Travis Perkins at 16-year low, Greencore rallies

Losing three-quarters of its value in four years has left the builders’ merchant at basement prices, and some in the City are buyers. There was better news at this convenience foods firm.

1st April 2025 15:23

Graeme Evans from interactive investor

The rebuilding of former FTSE 100 stock Travis Perkins (LSE:TPK) suffered another setback today after its warning of a slower-than-expected profit recovery kept shares at a 16-year low.

The builders’ merchant, whose portfolio includes the strongly performing UK arm of Toolstation, posted a bottom-line loss for 2024 and triggered a 20% downgrade to City consensus forecasts by reporting more challenging conditions at the start of 2025.

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The shares initially fell by more than 10% but later recovered to 522.4p as a number of City firms said they continued to see significant upside for the company’s valuation.

RBC Capital, which has a price target of 1,050p, said: “We continue to be positive, believing the outlook for UK construction, repair and maintenance and housebuilding is slowly improving and that there is significant self-help potential within the group.”

Bank of America retained its Buy recommendation with a reduced target of 770p, while Peel Hunt said the company “remains a scale player with significant turnaround potential”.

The company's key end markets have seen a progressive deterioration in demand over the past three years, driven by high inflation, rising interest rates and weak consumer confidence.

This has particularly impacted the Merchanting segment, where operating profit fell 30% to £149 million after a 6.2% decline in revenues to £3.8 billion in 2024.

Toolstation UK continues to make good progress, with last year’s revenues 2% higher and operating profit up 48% to £34 million.

Group operating profit fell 23% to £152 million, a level likely to be repeated in 2025 due to uncertainty over the pace and scale of recovery in key construction markets.

Chair Geoff Drabble, who is stand-in boss until the company finds a new CEO, has said Travis needs to refocus and change the way it operates in order to better serve customers.

The company believes it has become too centralised, which has increased costs and complexity.

Work is under way to empower local branches, with group support functions providing insight and driving the benefits of national scale.

Travis Perkins, which traded in the FTSE 100 between June 2013 and December 2016, believes this cultural shift will bring the business closer to its customers and enhance service levels.

It highlights attractive long-term structural drivers - in particular a shortage of UK housing, an ageing UK housing stock and a need to decarbonise the built environment.

The company said: “These structural drivers have taken greater prominence in the key priorities and policy setting of the new Labour government, which has set ambitious house building targets and see construction-led activity as a major pillar to kickstarting economic growth.”

A final dividend of 9p a share is due to be paid on 29 May as the group’s policy of distributing 30-40% of adjusted earnings results in a 19.4% fall in the total for 2024 to 14.5p.

Unscheduled update boosts Greencore

At the top of the FTSE 250, shares in convenience foods firm Greencore Group (LSE:GNC) rallied 9.6p to 178.8p after an unscheduled update lifted profit guidance for the year to September.

The shares were as high as 218p in December, having more than doubled on the back of a turnaround led by former Morrisons boss Dalton Philips.

He stabilised the business during the 2023 financial year and is now focused on rebuilding profitability and returns between 2024 and 2026.

The supermarket supplier said strong revenue and volume momentum continued in the second quarter, which together with ongoing operational improvements mean it expects a surplus between £112 million and £115 million.

This compares with last year’s £97.5 million and is 8% ahead of the City consensus.

Analysts at Jefferies said: “This demonstrates again the extent to which the cost and efficiency story still has legs to run.”

Some of the recent weakness in the share price has been driven by the company’s takeover pursuit of Bakkavor, which last month rejected a cash-and-shares proposal worth £1.1 billion.

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