Travis Perkins pays dividend as market recovers

Grant Prior 12 years ago

Directors at builders’ merchant Travis Perkins decided to restart paying dividends today as interim results highlighted a return to confidence in the market.

But the firm warned that “the market has only progressed from appalling in 2009 to miserable now” following the recession.

Private house building has led the recovery during the first six months of this year but bosses at Travis Perkins believe activity could tail off and are pinning their hopes of sustained growth on the repair and maintenance market.

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.

The stronger than expected figures have led the Board to approve payment of an interim dividend of 5.0 pence per share.

The company said: “Significant uncertainties remain, and we expect any recovery to be uneven and gradual.

“Public sector new construction, which we estimate represents less than 10% of our revenue, is certain to come under considerable pressure – but with the full effect probably not emerging until the second half of next year.

“New house building, from which we estimate we now derive 17% of our revenue, is unlikely to continue the very strong rate of growth seen in this first half which was spurred on by house builders opening mothballed sites to re-build their inventories.

“Against these more volatile segments of our market, we expect to see a continuation of the gradual recovery in the more resilient repair, maintenance and improvement sector.

“The RMI sector, which we estimate represents some 70% of our revenue, is driven by a range of diverse factors, including consumer and corporate confidence, public sector budgets and activity in the secondary housing market.

“Whilst signals here are mixed, once again activity levels could remain low on an historic perspective, and yet still show significant improvement over 2009.

“Commercial and industrial markets, which represent less than 10% of our turnover, and have the greatest impact on our Specialist merchanting business, were relatively weak during the period.

“The depth of the trough in market activity experienced in 2009 leads us to conclude that we will see modest growth in the trade market in 2010.

“In 2011, we anticipate that a gradual recovery in private sector new build and RMI work will just offset the probable impact of public sector investments being scaled back to an affordable level and expect further modest growth.

“Whilst the course of the recovery may be uneven in the short term, underlying demand factors continue to suggest that we are at, or near, the bottom of the trough in construction activity.”

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