Travis Perkins axes dividend as profits slump by 44 per cent
Builders merchant admits right issue is an option if trading conditions worsen
Friday 20 February 2009
The builders merchant and DIY retailer Travis Perkins has revealed it will consider a rights issue if trading conditions deteriorate further, as it scrapped its dividend and posted a 44 per cent slump in full-year pre-tax profits in 2008.
Travis Perkins, which operates the eponymous builders merchants and Wickes DIY retail chain, is also slashing its capital expenditure by £80m and warned it expects a "tough year" in 2009 and "limited prospects" for a return to growth next year.
The gloomy outlook was laid bare in underlying sales at its retail division, primarily Wickes, that fell by 12.2 per cent and were down by 15.8 per cent at its merchanting arm in the first five weeks of 2009.
Geoff Cooper, the chief executive of Travis Perkins, said a rights issue was one of the options it was considering to generate "fresh capital", but only if worsening conditions put it in danger of breaching its banking covenants.
The other options that would be considered include a significant sale and lease back of properties, sales of businesses or entering negotiations with banks over relaxing covenants.
Mr Cooper said: "We don't anticipate there to be a problem with banking covenants but it has to be said that we are living in uncertain times and we are keeping a very close eye on them." Travis Perkins, which had net debts of £1.02bn at the end of last year, said it planned to reduce its debt pile by £125m in 2009. Mr Cooper said Travis Perkins had identified a further £20m of cost savings this year from areas such as distribution.
For the year ended 31 December 2008, Travis Perkins reported a 44 per cent fall in pre-tax profits to £146.3m, including £56.2m of restructuring costs. The company said it was recommending the suspension of its final dividend, in an effort to preserve cash. Group sales were flat at £3.18bn.
Travis Perkins' trade division delivered like-for-like sales down by 4.2 per cent, while overall underlying sales for its retail division – which also includes the Tile Giant chain –fell by 5.3 per cent in 2008. For the full year, like-for-like sales of Wickes' core products fell by 4.8 per cent and underlying showroom sales tumbled by 8.1 per cent.
Mr Cooper said that last month's surprise rise of 1.9 per cent in UK house prices, according to the Halifax, was a "blip". He said: "We think there will be a 30-35 per cent peak to trough fall in house prices and they are down by 20 per cent at the moment, so there is a way to go."
Separately, Kingfisher, the owner of B&Q, the UK's biggest DIY retail chain, said it expects to meet the market's consensus forecasts for full-year pre-tax profits of £364m. B&Q's total sales declined by 5.5 per cent to £825m and like-for-like sales fell by 5.9 per cent for the 13 weeks to 31 January. Kingfisher, which has operations in France, China, Russia and Poland, posted group sales down by 0.3 per cent in constant currency terms.
- 1 The difference between a migrant and refugee, in one sentence
- 2 Miley Cyrus calls out hypocrisy of women’s nipples being taboo
- 3 Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
- 4 iPhone 5c to be discontinued, no iPhone 6c to replace it
The difference between a migrant and refugee, in one sentence
Spain accused of 'provocation' after letting Russian submarine refuel off Gibraltar
Allonautilus scrobiculatus: World's 'rarest' creature spotted for only the third time ever
Miley Cyrus calls out hypocrisy of women’s nipples being taboo
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...