Travis Perkins stock price tumbled 9% today. Here’s why

Travis Perkins stock price tumbled 9% today. Here’s why
Written by:
Michael Harris
8th September, 15:24
Updated: 8th September, 15:25
  • Travis Perkins profits plummeted 81% in H12020 following the coronavirus-induced lockdown measures
  • Last month, the firm suspended its planned 33.0 pence-a-share final dividend
  • Travis Perkins stock price plunged as much as 9% today to trade at a 5-week low

Shares of Travis Perkins PLC (LON: TPK) fell around 9% on Tuesday after the company reported that its profits plummeted 81% in the first half of the year following the coronavirus-induced lockdown measures and shutdown of construction sites. 

Fundamental analysis: Construction halted 

Lockdown measures forced the company to shut its building sites, which then led a plunge in sales by 20%. Moreover, lower sales and revenue resulted in 2,500 job cuts as well as talks about shutting down 165 outlets.

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The largest building materials distributor in the UK said its current restructuring plan would provide cost savings of 120 million pounds per year. Travis Perkins reported a decline in adjusted operating profit to 42 million pounds in the first half through June 30 from 220 million pounds last year. 

The company owns over 2,000 branches, construction sites and stores in the UK. Revenue for the first half of the year plunged 20% to 2.78 billion pounds, down 19% on a like-for-like basis.

Demerger of Travis Perkins’ branch Wickes was delayed until stability returns to markets.  Regarding its future prospects, the company warned about uncertainty in the short run and asked the British government to help the UK construction industry.

Travis Perkins also paused its planned 33.0 pence-a-share final dividends earlier this month. The group hasn’t declared an interim dividend because of the “ongoing level of uncertainty in the U.K. economy and the group’s end markets.”

Technical analysis: Can we break lower today?

Travis Perkins stock price plunged as much as 9% to trade at GBX1115 for the first time in 5 weeks. The price action is now testing the 100-DMA at GBX1128, which is providing daily support. 

Travis Perkins stock weekly chart (TradingView)

A break and close below this technical indicator, as well as below the ascending trend line (the blue line) at GBX1140, will pave a way for a deeper pullback. The nearby support is located at GBX1100, before a more meaningful demand can be found just below GBX1000.

Summary

Travis Perkins reported a profit decline of 81% in the first half of 2020 as coronavirus-related restrictions and halts at its construction sites reduced the group’s sales by 20%. Shares tumbled 9% to hit a 5-week low. 

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