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Travis Perkins (TPK) is today’s blue-chip loser after a full year profits warning that could represent a canary in the Brexit coal mine. Especially after a summer of resilient UK economic data seeing off an army of doomsayers. News of multiple branch closures in response to slack demand, meaning an additional £40-50m exceptional restructuring costs, and management unable to gauge 2017 demand is not what ardent believers in the UK’s cherished housing market will want to hear. Not after yesterday’s ONS UK house price data delivered a consensus-beating and surprise re-acceleration in August (notably down South) following an understandable referendum-inspired calming in July. And not after UK Jobs data just surprised to the upside too!
The warning may, however, play in favour of all those recently quietened doomsayers who can claim anew that it is still too early to see a Brexit impact in UK macro data. Seasonality could play its part with a number of warnings from sector peers around the same time last year, but weather has been pretty kind.
Whilst undoubtedly a short-term set-back, a difficult outlook forcing the group into even more aggressive cost cutting than its current restructuring programme will only help ensure that a higher margin silver lining prevails in the longer term. Shares already well off their worst levels.
Mike van Dulken, Head of Research, 19 Oct
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