No dividends just yet.

Growth will be low and slow, says Travis Perkins

Published:  14 April, 2010

NORTHAMPTON: Travis Perkins reported group revenue down by 7.8% to £2 930.9m and pre-tax profit down 11.1% to £180m for 2009. No share dividend will be paid until "uncertainty is reduced and improved prospects for our markets are visible", said chairman Tim Stevenson.

Much uncertainty remains about the condition of the UK economy and the prospects for construction markets.

"We are prepared for a long period of probable low growth and difficult trading conditions before we can anticipate a return to growth in our markets," Mr Stevenson stated.

Geoff Cooper, chief executive, said the company's principal focus last year was on cutting costs and trading profitably to deal with a predicted 25% fall in activity levels, and on taking a range of actions aimed at reducing net debt.

"While our overall forecast of activity levels for 2009 proved broadly correct, the retail market held up much better than expected following actions taken by monetary authorities to boost consumer sentiment," he added.

The market stabilised in the second half of the year. "Our view of 2009 now points to an overall trough of 25%, but the trough in merchanting, of a little over 30%, occurred a few months later than we forecast while the retail trough, of around 15%, occurred in the first quarter of 2009.

"We have seen the benefit of our spread of businesses across the retail and merchanting segments of the market," Mr Cooper commented.

For 2009, the group reported revenue down £247.7m at £2 930.9m (2008: £3 178.6). This revenue decline drove adjusted operating profit down 17% to £224.6m (2008: £271.5m), adjusted profit before tax down 11% to £180.0m (2008: £202.5m), and adjusted earnings per share down by 22.4% to 75.2p (2008: 96.9p).

The revenue decrease of 7.8% comprised a decline of 8.6% in like-for-like sales, with network expansion accounting for growth of 1.0% with a reduction in trading days accounting for 0.2%.

Adjusted group operating margin fell by 0.88% to 7.66% (2008: 8.54%) while adjusted operating margin in the retail division improved by 0.7% to 5.81%, merchanting division adjusted operating margin fell by 1.29% to 8.76%, reflecting the challenge of reducing fixed costs in line with the significant fall in volume experienced by the market.

Mr Cooper said: "As expected, with less construction work available, competition in merchanting intensified during the course of 2009, with a related deterioration in pricing conditions.

"Product cost and price inflation continued to be relatively strong by historical standards. In these circumstances, we sought to trade flexibly, preferring to protect our gross margin rather than fill our capacity with low margin work, and re-doubled our efforts to obtain favourable input prices through a range of procurement initiatives.

"In contrast, the pricing environment in retail remained relatively benign as competitors sought to restore their low operating margin and achieve an economic return.”

For the seven weeks to 20 February, group like-for-like sales performance was down 2.7%, with the merchanting division down by 2.8% and the retail division down by 2.4% with core and kitchen and bathrooms down 8.0% and up 23.3%, respectively.

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