Travis Perkins resumes dividend as profits rise

Published:  29 July, 2010

NORTHAMPTON: Travis Perkins beat forecasts with a 24% rise in first-half profit and said it will start paying dividends after a two-year gap.

The firm, which earlier this month agreed to buy plumbing and heating company BSS Group for about £558m also said today that its second-half had got off to a good start and it viewed the future with confidence.

Geoff Cooper, chief executive, said: "We remain determined to further develop our customer propositions via an exciting programme of organic growth initiatives with the aim of stretching our lead over competitors."

The group made an underlying pre-tax profit of £111.8m for the six months to June 30 compared with £90.4m in the same period in 2009 and above analysts' consensus forecast.

Revenue increased 4.7% to £1.52bn with sales at branches open at least a year up 3.4% as demand recovered, particularly from house builders.

Gross margins were slightly lower in the merchanting business and maintained in the retail division. In July, like-for-like sales are 10% ahead in merchanting whereas Wickes' core like-for-like sales are down 1.5%.

The firm declared an interim dividend of 5-pence per share. It had cancelled shareholder payouts in February 2009 as its markets slumped in the recession.

Mr Cooper said: "While we continue to see modest market growth following a severe recession, we view the future with confidence."

The company expects the rate of recovery to be moderate but warned of "significant uncertainties".

"Public sector new construction, which we estimate represents less than 10% of our revenue, is certain to come under considerable pressure - but with the full effect probably not emerging until the second half of next year. New house building, from which we estimate we now derive 17% of our revenue, is unlikely to continue the very strong rate of growth seen in this first half which was spurred on by house builders opening mothballed sites to re-build their inventories. Indeed, recent lead indicators suggest new house building activity is likely to slow in the second half-year. However, we expect the difficulties with mortgage availability and low consumer confidence are only likely to dent the second half rate of gain over the very low levels of building in 2009, rather than produce another contraction," the company said in the statement.

Travis expects gradual recovery in the more resilient repair, maintenance and improvement that represents some 70% of its revenue. "Materials for RMI work are purchased by both consumers and tradesmen. Both types of customer use our retail and merchanting outlets, but consumers are much more strongly represented in Wickes, Tile Giant and ToolStation, our retail brands," it said.

"We continue to see a slight contraction in sector capacity, with competitors announcing a few branch closures each month, most of which have come from publicly owned networks. Independent merchants have generally performed relatively better through the recession due to their strong customer relationships and an injection of cash from lower working capital," Travis said.

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