Profits fall at Travis Perkins
Thursday 31 July 2008
Travis Perkins warned that the housing market will deteriorate further, as it posted a drop in first half pre-tax profits yesterday.
But the company expects to continue to gain market share at its Travis Perkins-branded merchants, which supply builders, and its retail division, which includes the Wickes DIY chain.
Geoff Cooper, Travis Perkins' chief executive, said a key issue was the sharp decline in housing sales. "I think there is no question that the outlook is not bright and that we will see worsening conditions," he said, adding: "On the housing side we are seeing a real slowdown in activity among house builders."
For the six months to 30 June, Travis Perkins delivered a 3.2 per cent decline in pre-tax profits to £124.5m. However, Mr Cooper said that while like-for-like sales at Wickes, which has more than 190 stores, fell by 1.1 per cent for the overall six-month period, same store sales actually grew by 2.3 per cent for the last eight weeks of the period.
Mr Cooper suggested that Wickes was out-performing its competitors, including B&Q and Homebase, because it attracts more tradesmen and is less reliant on residential DIY customers.
"Where the DIY market has gone soft first is with casual DIY people, so the soft end of the market has gone first," he said.
He claimed that prices "across the basket" at Wickes were 5 per cent cheaper than at its rivals, which would help the retailer as customers, who cannot afford to move house, seek to trim their home improvement budgets.
"We are seeing the first signs that people who are not able to move are renovating," said Mr Cooper.
The firm's merchanting division carved out a 1.6 per cent increase in like-for-like sales over the six months, but sales growth was weaker in the second quarter.
However, Mr Cooper stressed that new housing accounts for just 18 per cent of group sales. Sales also held up at Travis Perkins' government and commercial construction businesses, which are involved in supplying major contractors to PFI projects.
As part of its plans to reduce expenditure, Travis Perkins aims to reduce its headcount by 1,300 by September from planned levels – this will largely come from not replacing staff who decide leave.
Travis Perkins shares rose by 6.5p to 581p.
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