Travis Perkins H1 2026: The Profit Uptick Is Real - But Revenue Won't Cooperate

The first thing to sort out is what that headline EPS number actually measures. Travis Perkins reported an adjusted EPS of 15.1p for the half year to 30 June 2026, up 13.5% from 13.3p a year ago. That is the adjusted figure - the one management uses to track operating performance - not GAAP. GAAP EPS in FY2025 was minus 83.3p, after £222m of impairments, restructuring charges, and the write-down of Toolstation Benelux, CCF, and specific Merchanting branches. GAAP profit after tax for H1 2026 was £30m, which works out to roughly 7p per share on a statutory basis. The 15.1p number strips all that out so you can see what the business is earning before the baggage. The distinction matters because the headline can read as a recovery story when the underlying cash-generating engine is still only just above breakeven.

Revenue is the part that won't cooperate. Group revenue fell 1.8% to £2,258m. Volume decline, the prior-year disposal of Staircraft, and weak UK construction activity are all at play, partially offset by building-material price inflation. That is the third consecutive half-year of declining top-line revenue, after H1 2025 (down 2.1%) and FY2025 full year (down 0.9%). A flat-to-falling revenue line tells you this is not a cyclical upswing yet. It tells you the market is holding its ground while the business tries to rebuild margin.

On the margin side, that is where the story gets slightly more constructive. Adjusted operating profit (excluding property profits) held steady at £62m year on year, even as revenue slipped. Management attributes this to better pass-through of price inflation, a favourable sales mix, and procurement gains in the General Merchant division. Quarterly like-for-like merchanting sales improved from minus 3.2% in Q1 of FY2025 to plus 2.1% in Q4, and management says the trend continued into early 2026. You don't need to believe that's a full recovery to acknowledge it's a trajectory - the curve is bending rather than continuing to fall.

Toolstation UK is the clearest bright spot, with operating profit up 29% to £44m on the full-year and H1 performance in line with expectations as the store estate matures. Toolstation Benelux, by contrast, remains what management calls a "perennial loss maker," expected to produce a similar loss in 2026. The company has now drawn a line under that assessment rather than dangling further turnaround promises.

The balance sheet is the part of the results that actually impresses. Net cash before leases stands at £55m, improved from £103m of net debt a year ago and from the £1m net-cash position at year-end (which itself was the first net-cash position in nearly 30 years). Net debt-to-adjusted EBITDA has come to 1.9x, back inside the group's stated target range of 1.5x to 2.0x. The group generated a £196m cash inflow last year, and capital discipline plus working-capital management are doing the heavy lifting. No significant refinancing is due until 2028, thanks to the £250m bond refinancing executed last year via US private placement notes. In a high-rate environment with weak construction demand, that financial flexibility is not a decoration - it's the reason the company can sit this out rather than being forced into reactive decisions.

The dividend tells you where management thinks earnings are going. The interim was 4.0p, down from 4.5p last year, consistent with the full-year cut from 14.5p to 12p in FY2025. The payout policy is 30-40% of adjusted earnings. At 8.0p for a normalised year, the yield at the current share price of roughly 612p is about 1.3% - thin, and well below the 2.1% the market priced in a few months ago. The dividend is not the reason to own this stock right now.

The broker community is split in a way that usually means no one knows the answer yet. Barclays downgraded to Sell with a £4.61 target in late July. Jefferies has been at Sell with a £4.64 target since May. Deutsche Bank sits at Sell with £4.70. JPMorgan remains the lone Buy with a £6.30 target. Morgan Stanley and Berenberg are in Hold territory at £6.85 and £5.80 respectively. That spread - from £4.61 to £6.85 - tells you the debate is not about whether the balance sheet improved. It's about whether you believe the merchanting margin trajectory is durable enough to justify a multiple expansion while revenue is still negative. The bears say the UK construction backdrop is too weak and the recovery is being overestimated. The bulls say the balance sheet and Toolstation growth give the business optionality that the current price doesn't reflect.

Here's the factor read. Revenue is the weakest link - a D at best, given three consecutive periods of decline in what should be the leading indicator of any turnaround. Growth is a C-, with margin improvement in merchanting and Toolstation UK pulling ahead while the top line lags. Profitability is a C+, with stable adjusted operating profit despite falling revenue showing that the cost and procurement actions are working even if volumes haven't responded. Safety is a B+, the highest grade on the stack, driven by the balance sheet returning to target leverage and the cash generation that got it there. Momentum is a D - the share price sits 16% below its February 2026 high of 723.5p, and the broker downgrades through June and July tell you institutional sentiment has tilted cautious.

The stock doesn't pass every test, and it isn't supposed to. This is a turnaround play in the early stages, not a compounder you pile into. The balance sheet gives the company the runway to keep investing in merchanting and Toolstation while the UK construction market sorts itself out. Toolstation Benelux has been accepted as a write-off rather than a distraction. New CEO Gavin Slark, who joined in January from SIG, has put a senior team in place and says the Oracle ERP disruption is largely behind them.

What would change the calculus? Revenue growth turning positive for two consecutive quarters would be the first real signal that the merchanting recovery is translating into volume, not just margin engineering. A broker consensus shift from this fragmented state toward a more unified view would indicate that the earnings trajectory has become legible enough for institutions to take a position. On the downside, a breach of the 1.9x leverage target or another impairment charge would suggest the balance sheet strength is more cosmetic than structural.

Travis Perkins is not cheap by any traditional metric, but it's not priced as a high-growth story either. It's priced as a business that needs to prove its margin gains are lasting while revenue finds a floor. The factor stack says sit it out if you need conviction on growth, hold it if you believe the balance sheet and Toolstation give you enough margin of safety to wait for the cycle to turn, and keep watching merchanting like-for-like sales as the single data point that will tell you whether this is a recovery or a prolonged hold.

In our book, the portfolio role is clear: this is a satellite position in a UK cyclicals sleeve, not a core holding. It hedges against a construction recovery while the balance sheet gives you the option to hold through the wait. The trigger to add is sustained positive volume growth. The trigger to reduce is leverage drifting above 2.0x again. Until one of those fires, the process says hold and watch.