Why Investors Are Losing Confidence In Travis Perkins plc (TPK)
Shares in Travis Parkins plc (LON:TPK), building merchant and home improvement products retailer, were hit hard as profits-before-tax fell more than 65% in the year to December 2016. The company had hardly recovered from a steep-drop in market capitalization post-Brexit. Yesterday’s subdued results—comparable sales growth slowed down to 2.7% from 3.8% a year ago—dealt another blow to the stock price. The weak-link was plumbing and heating division, that contributes nearly 25% to the group’s revenue. Additionally, TPK warned that further pressure on growth going forward can be seen in case higher-inflation impacts the consumer demand. Investors’ reaction, evident from a more than 7% drop this Thursday, indicates concerns about its future profitability as the company’s net income dropped from a-year-ago’s £167.7 million to £12.7 million. While strong cash generation allowed TPK to boost dividends slightly – TPK has raised dividends consistently over the past seven years, the investors may find the valuation too rich now that the company is indicating economic headwinds.