What's new:
■ New banking facility that runs until 2016
■ Group turnover up 5.5 per cent
■ Wickes hit by weak retail spending
Travis Perkins delivered a 5.5 per cent increase in turnover for the 11 months to the end of November, which includes a pro-forma contribution from the recently acquired BSS Group. Trading in the group's merchanting division rose by 11.3 per cent, although the tough trading climate saw this trimmed back to a 8 per cent increase (per trading day) on a like-for-like basis in the two months to the end of November.
However, the retail side faced a much tougher environment, with the Wickes chain of retail outlets suffering a 1.6 per cent fall in like-for-like sales. Core product sales, which make up around 80 per cent of turnover, rose by 1.6 per cent, but kitchen and bathroom sales fell by 13.3 per cent, reflecting poor consumer appetite for big ticket items.
The group remains on target to reduce net debt to £600m by the end of the year, and has recently secured a new lending facility worth £550m. This can be drawn on from April 2013, when the group's existing £800m facility matures, and runs until December 2016. Following organisational changes into four operating divisions, a new role of deputy chief executive has been created and will be filled by Mr John Carter, currently the group's chief operating officer.
Numis Securities says...
Hold. Travis Perkins should be able to retain sector leading margins, with BSS being the major driver of growth in 2012 and beyond. Ultimately, new housing and the repair, maintenance and improvement sectors will remain the key drivers, but BSS has increased the group's exposure to non-residential activity. However, given the downward pressure on UK construction activity, we are reducing our 2012 pre-tax profits forecast by 5 per cent to £296m and EPS to 93.4p. Our price target is cut from 1,000p to 900p on the basis that short-term earnings growth will be limited.
Liberium Capital says...
Hold. Trading has slowed a little in the past two months but there is little to suggest that Travis Perkins cannot achieve a £20m increase in profits in the coming year to produce 2012 profits of £309m and EPS of 96p. Around half of this could come from further savings relating to the integration of BSS, while Toolstation will be 100 per cent owned from January, and should add around £7m in profits. The balance of the profit growth could come from the recently acquired and rebranded Focus stores. Travis shares are trading on around 8 times forecast earnings, the low end of its historical range, suggesting that the market remains sceptical but as confidence builds expect a revaluation to our target price of 915p.
