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Travis Perkins recovery continues, but market conditions still 'miserable'

29 Jul 10 Travis Perkins enjoyed much-improved trading during the first half of 2010, with increases in revenue and profit, but said that market conditions have merely progressed “from appalling in 2009 to miserable now”.

Travis Perkins enjoyed much-improved trading during the first half of 2010, with increases in revenue and profit, but said that market conditions have merely progressed “from appalling in 2009 to miserable now”.

For the six months to 30 June 2010, revenue, at £1,522.1m, was 4.7% up compared with the same period last year. Group adjusted operating profits were up 2.4% to £120.4m, with adjusted profit before tax ahead by 23.7% to £111.8m.

Exceptional costs of £4.6m relate to its BSS acquisition and are estimated to total £18m by the year end, excluding integration costs.
http://www.theconstructionindex.co.uk/news/the-construction-index-news/Travis-Perkins-set-to-take-over-BSS

The Group's operating margin fell slightly, at 7.9% against 8.1% last half-year, chiefly due to lower retail margins.

Travis Perkins reduced its net debt to £410.5m after generating cashflow of £137.7m during the reporting period.

The gross deficit of the pension scheme decreased by £6.5m to £36.5m.

The firm said that after a difficult first half of 2009, its markets stabilised towards the end of that year.

“From March 2010 onwards we saw a strong rebound in activity and a reversal in the divergent fortunes of the trade and retail markets. Although the rebound has continued in July, we expect the rate of recovery to moderate,” said Geoff Cooper, chief executive.

“Against the historic levels of new building and repair works, the market has only progressed from appalling in 2009 to miserable now. However, the current low level of activity on this perspective still represents a significant gain in market volume from the troughs of last year. Since activity is still some way off peak levels, we expect further growth, albeit gradual.

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“Significant uncertainties remain, and we expect any recovery to be uneven and gradual.”

Repair, maintenance and improvement accounts for 70% of Travis Perkins revenue, and the firm expects a continuing “gradual recovery” in the sector.

House-building, which accounts for 17%, has enjoyed a strong first half but is unlikely to continue this rate of growth, it said.

Public sector construction, which Travis Perkins expects to come under “considerable pressure”, represents less than 10% of its revenue.

Its retail business performed better than expected in 2009, but has started 2010 poorly, which the firm attributed partly to the hike in VAT. It estimates the retail market is down by about 3% over the first half of 2009.

In contrast, the trade market grew by an estimated 5%.

Travis Perkins said it continues 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, it added.

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