There wasn't a lot that could have gone wrong for a company like Travis Perkins that didn't last year. Aside from economic uncertainty and weak consumer confidence limiting purchases of kitchens and bathrooms at its Wickes branches, the weather was awful and inflation, generally good news for such retailers, subdued. This year the construction market is expected to grow by one or two percentage points. There may also be some upside if the weather is not quite as bad. The biggest boost would be a rise in the level of transactions in the housing market. Some such rise has indeed been manifest for the past three months. This will, however, take six months or so to feed through into purchases of basic building materials and new kitchens and bathrooms.
An increase in public infrastructure would also help, but again this will take a while to feed through. The shares have performed well this year, anticipating that pick-up in demand, though they lost 37p to £12.71 yesterday on profit taking. On just short of 13 times' earnings, they look a good way of investing in any housing recovery, but that is taking a long-term view. Hold, says The Times' Tempus.
The Telegraph's Questor last looked at Travis Perkins in July 2010 and warned that it was not comfortable with the lack of visibility around demand for its products, given that public sector projects were under growing pressure from spending cuts. In truth, the economy has not changed much since then. However, shares in Travis Perkins have. They were trading at just 754.5p in July 2010, but have risen by 70 per cent in the intervening period. Nonetheless, this column remains reluctant to advise readers to pile in to Travis Perkins.
The company is well managed, and this is now priced into the shares, which are trading on a current price-earnings ratio of 13.3, falling to 11.8 times next year, and a dividend yield of 2.2 per cent. Questor feels that the uncertainty facing construction markets and consumer confidence means that the valuation of Travis Perkins is too punchy. There could well be more attractive opportunities to invest in the company later in the year. Avoid, Questor says (Last IC rating: Hold, 26 Jul).
Centaur Media seems the perfect example of how a rising market lifts all boats regardless. The shares have doubled since July, but the halfway figures, though in no way a disappointment, suggest no particular reason for optimism yet, and a couple of negative brokers' notes saw the shares subside 5.5p to 53p again. The business publishing division is still suffering, but digital is now 39 per cent of revenues and margins are improving to an extent that earlier targets of 20 per cent look achievable.
Part of the problem is that the financial results are heavily skewed towards the fourth quarter, April to June, when subscriptions are up for renewal. The company had hoped to return to underlying revenue growth this year, but a cautious statement with the interims implies this is not yet certain, and, given the low visibility, nor can it be. The shares sell on less than ten times' earnings, but there looks like no immediate reason why they should head back up again, Tempus in The Times writes (Last IC rating: Hold, 20 Feb).
Business press headlines:
British defence giant BAE Systems has warned it will be forced to cut 3,500 jobs in the US if the threat of Pentagon spending cuts becomes reality. The company said it had warned staff within its US ship repair business of the possible cuts after the US Navy signalled its 'intent to cancel' a number of ship maintenance requirements, should unresolved budget negotiations between Congress and the White House drive spending down. BAE, which employs around 38,000 people across the US and 5,000 in ship repair, said that cancellation of the maintenance plans would 'significantly impact' its ship repair operations in Norfolk, Virginia; San Diego, California; Mayport, Florida; and Pearl Harbor, Hawaii. [The Telegraph]
The 4G auction has ended in a humiliation for George Osborne, pulling in £1.2bn less than expected for the Treasury. But it is a boon for smartphone users, leaving mobile networks with the spare change to finance a rapid roll-out of superfast wireless internet. The biggest ever sale of British airwaves raised £2.34bn for the public purse, less than the £3.5bn the chancellor was counting on to keep government borrowing in check, and below the £4bn analysts had estimated based on prices fetched in recent European 4G auctions. [The Guardian]
BP has shaved $3.4bn off the maximum fine for the 2010 Gulf of Mexico oil disaster. A court order, handed down by a judge in New Orleans, means BP will no longer be liable for a maximum of $21bn in fines at next week's civil trial - after a judge ruled the oil company would not have to pay for 810,000 barrels of oil collected at the source of the broken well. The oil company had been facing up to $21bn in fines in the civil case, based on the amount of oil that gushed into the Gulf following the fatal blowout of its well. [The Guardian]
The Queen's favourite carpet maker, Axminster, is to go into administration as royal patronage proves insufficient to fend off the recession. Almost 450 jobs are at risk at the Devon-based company, whose designs are sold in John Lewis and Carpetright, as well as adorn the floors of Windsor Castle and Clarence House. Founded in 1755 and granted a five-year royal warrant in January 2012, the company became the latest slice of British business heritage to hover on the brink of collapse last night. Duff & Phelps are set to be appointed as joint administrators and the company will continue to trade while "all potential rescue/restructuring options" are explored [The Times]
With roots in the East End rag trade stretching back a century and the attraction of brand ambassadors including Serge Gainsbourg, Lee Cooper jeans were once a must-have for aspiring rock stars. But the fashion label yesterday fell into American hands through a $72 million transatlantic takeover. Sun European Partners, the private equity owner of Lee Cooper, has agreed to sell the business to Iconix, a US company with a collection of brands including Umbro, Massimo and Ed Hardy. [The Times]
The US Congress is preparing new Iran sanctions legislation that would target the European Central Bank's system for settling cross-border bank payments. The proposed bill is part of a package of measures designed to pressure the ECB to do more to prevent Iranian companies and banks from using the Target2 payments system to conduct transactions involving euros. The legislation, which could be introduced next week, is aimed at closing loopholes to earlier financial sanctions which the US Congress has imposed on Iran over the past 18 months to slow its nuclear programme. [Financial Times]
BSkyB has shown it still has a stranglehold over the best new movies on pay-TV as it signed a major rights deal with Disney, dealing a blow to online movie-streaming rivals NetFlix and Amazon's LoveFilm. Disney becomes the fourth of the Big Six Hollywood studios to renew with Sky, after Warner Bros, NBC Universal and Sony. The deal covers what is known as the first Pay-TV window, an exclusive period of about a year, after movies such as its latest release Wreck-It Ralph, pictured, have been shown in cinemas. It also includes online platforms such as mobile service Sky Go and Sky's cut-price streaming website Now TV. [The Independent]
Estate agent Countrywide is set to trump Crest Nicholson's recent £550 million float after unveiling plans to join the FTSE 250. The company, which was listed for 21 years before being taken private at the top of the market in 2007, is hoping a fragile housing market recovery will be enough to tempt investors amid growing demand for new issues. It plans to raise £200m by selling shares in a new holding company controlling the business, and will use the money to repay some debt and grow the business, including acquisitions. [The Scotsman]
The energy company EDF has launched a civil claim for £5m in damages against a group of activists who shut down one of its gas-fired power stations in a week-long protest last year. A group of 21 protesters from the campaign group No Dash for Gas climbed two chimneys at EDF's West Burton plant in Nottinghamshire last October in a demonstration over Government plans to build 20 gas-fired power stations. The group pleaded guilty to aggravated trespass at Mansfield Magistrates Court yesterday for their part in the protest, and are awaiting sentencing. [The Independent]
