Travis Perkins navigates profit collapse with restructuring push as Toolstation outperforms

Travis Perkins plc, the UK’s largest supplier of building materials, has reported one of its most challenging financial years in recent memory, marked by a sharp fall in earnings and intensifying pressures from a subdued construction market. For the full year ended December 31, 2024, operating profit fell by a staggering 98.8% to just £2 million, down from £161 million a year earlier. Group revenue declined 4.7% year-on-year to £4.61 billion, driven by a slump in its Merchanting segment and continued deflationary trends.

While management improved cost control and reduced net debt before leases by £123 million, these efforts were offset by a £139 million hit from impairment charges and restructuring actions. These included underperforming branches and the Staircraft division. Adjusted earnings per share fell sharply to 36.6 pence from 54.4 pence in 2023, and the company swung to a net loss of £77 million after tax.

The collapse in operating profit and ongoing market uncertainty have pushed Travis Perkins to implement a far-reaching strategic overhaul to regain control of its cost base, streamline its business model, and reallocate capital towards more profitable segments.

What is driving the company’s major restructuring?

Travis Perkins’ restructuring is rooted in a strategic reassessment of how the business operates amid a prolonged construction downturn. The UK construction industry has been buffeted by high interest rates, inflation, and weak consumer confidence, all of which have stifled demand. This pressure, coupled with internal inefficiencies and over-centralisation, diluted the company’s returns and led to rising leverage.

To address these issues, management implemented aggressive cost reduction efforts, trimming overheads by £53 million. This included £35 million from prior restructuring efforts, a further £36 million in discretionary spend cuts, and a reduction in central roles. Meanwhile, 51 Merchant branches were closed, including 42 Benchmarx kitchens outlets, which are being integrated into General Merchant sites to enhance operational efficiency.

The company has acknowledged that years of strategic missteps—particularly reducing its skilled salesforce and overcomplicating branch structures—eroded its competitiveness. With a focus now on empowering local branches and restoring entrepreneurial agility, the group is shifting towards a more customer-centric and decentralised model.

Is Toolstation becoming the core growth engine?

Amid widespread weakness in the Merchanting division, Toolstation has emerged as a bright spot in the Travis Perkins portfolio. Toolstation UK’s adjusted operating profit rose 48% year-over-year to £34 million, supported by 2.5% revenue growth to £821 million. Margin expansion was driven by improved purchasing, stronger product mix, and supply chain efficiency. Toolstation also added 17 new stores in the UK, with plans to maintain similar growth in 2025.

Benelux operations, though still lossmaking, reported a 35% reduction in adjusted operating losses to £13 million after a strategic review led to the closure of 11 underperforming stores and a 15% headcount reduction. The company anticipates further progress in 2025 as procurement and logistics improve.

However, the Toolstation France operation was shuttered entirely after management failed to find a buyer. Eight stores were sold to a domestic retailer, but 43 others were closed. This move underscores Travis Perkins’ more disciplined approach to capital allocation and its focus on profitable geographies.

What’s happening with Travis Perkins stock and investor sentiment?

Following the release of its 2024 financial results, shares of Travis Perkins plc (LON: TPK) plunged by as much as 13% on April 1, 2025, falling to 478 pence—the lowest level since 2009. The dramatic share price collapse highlights deep investor concern over the group’s profitability and market positioning. The stock’s sharp decline was also influenced by management’s forward guidance, which projected flat adjusted operating profit for 2025, disappointing analysts who had hoped for signs of recovery.

Market sentiment has turned decidedly bearish, with analysts and investors reacting to both short-term earnings pressure and long-term structural concerns. Despite this, some investment firms remain cautiously optimistic. JPMorgan Chase & Co. reiterated an “overweight” rating while lowering its target price from 1,000 pence to 910 pence. Separately, brokerage firm Stifel upgraded the stock to “buy” from “hold,” citing the company’s restructuring progress and future upside potential once construction markets rebound.

Still, the broader consensus reflects wariness. Many investors appear to be taking a wait-and-see approach, particularly given uncertainty around consumer confidence, delayed construction projects due to election-related budget postponements, and ongoing inflationary pressures.

Can Travis Perkins recover its profitability and market leadership?

Travis Perkins’ outlook for 2025 remains cautious. While pricing has stabilised, volumes in the Merchanting business are still in modest decline. The group expects full-year adjusted operating profit (excluding property profits) to remain flat year-on-year. Nonetheless, there are reasons for guarded optimism. Toolstation continues to outperform and is on track to deliver another year of profitable growth. Additionally, broader construction demand could rebound if interest rates fall and fiscal policy stimulates infrastructure investment under the new Labour government.

Technological upgrades also form part of the turnaround narrative. A new Oracle ERP system launched in mid-2024 promises to improve financial controls and stock visibility. Although it caused temporary working capital disruption worth £50 million, the system is expected to yield efficiency gains and streamline operations going forward.

The dividend for 2024 was cut to 14.5 pence per share, down from 18.0 pence, in line with the group’s 30–40% payout policy on adjusted earnings. This move reflects a more conservative stance as the group seeks to manage leverage and rebuild resilience.

What should investors do now—buy, hold, or sell?

Given the current landscape, Travis Perkins is best characterised as a “hold” for existing shareholders and a potential “buy” for long-term investors with a high risk appetite. The company’s dominant UK market position, combined with a renewed focus on local empowerment and disciplined capital use, lays the groundwork for future recovery. However, the turnaround is still in its early stages, and macroeconomic headwinds continue to obscure visibility.

Short-term risks remain elevated. The group must deliver operational execution, improve profitability in the Merchanting division, and avoid further one-off charges. But if demand returns in the construction sector and Toolstation maintains its upward trajectory, Travis Perkins may find a pathway to restored investor confidence and share price growth.

For now, investors should closely monitor the group’s progress on cost control, digital integration, and debt reduction. A stabilisation in earnings and a pickup in UK construction activity could be catalysts for a re-rating later in the year.