Travis Perkins eyes more buys after profits rise 22%

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Travis Perkins, Britain's third-largest builders' merchant, said it would focus on further acquisitions after a 22 per cent increase in profits before tax for the six months to June. Following the £26.5m purchase of the plumbing and heating group Jayhard in July, the company said yesterday it planned further consolidation in a market in which the independents' share is almost 50 per cent.

Travis's chief executive, Frank McKay, highlighted the South-east as an attractive market and forecast that the company could have up to 1,000 branches within three to four years. The company currently has 681 branches but expects that figure to rise to 700 by the end of the year.

Mr McKay also stated that the heavy building materials segment of the business would continue to be "the engine behind the company" and that acquisitions would be likely to reflect that fact. More than 53 per cent of the company's business remains in this segment despite a spate of acquisitions in the plumbing and heating sector.

The company benefitted from the combined effects of the continuing robustness of the housing market and "excellent weather-related trading" in the spring to post pre-tax profits of £80.8m, up from £66m last year.

Turnover, up 23 per cent to £816.6m, was aided by growth through both acquisition and like-for-like sales. With the UK currently seeing a gap of about 50,000 between demand for new homes and supply, Mr McKay expected the market to remain strong in the medium term.

However, with 65 per cent of the company's business in repairs, maintenance and improvements, Travis Perkins would also continue to benefit from the strong DIY market and the poor quality of housing stock in the UK.

The finance director, Paul Hampden Smith, also confirmed the possibility of a share buyback although this would probably not happen soon. However, as the market for medium to large acquisitions tended to be "famine and feast" the company would continue to review the situation.

The interim dividend was up 24.6 per cent from 6.1p to 7.6p a share and the company says that the final dividend will not be less than 16.8p, a 25 per cent increase for the full year.

Shares in Travis Perkins were up more than 4 per cent yesterday, closing at 1,311.5p following the announcement although one analyst, who did not wish to be named, felt that the market had not yet fully priced in the potential of a housing market slowdown.

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