26th Feb 2014 09:10
LONDON (Alliance News) - Travis Perkins PLC, the UK's largest building merchant, Wednesday reported an increase in profit for the full year, but warned that although recovery for the building market continues to improve it is "still early days".
The FTSE 100 company said it finally saw its markets come out of recession as confidence in the building industry driven partly by the government's Help-to-Buy scheme, picked up. However, it noted that the UK market for building and construction materials is still, at December 2013, 13% below the peak levels of 2008. New build makes up 20% of the business with the rest consisting of repair and maintenance.
Travis Perkins posted pretax profit of GBP312.6 million for the period ended December 31, up from GBP299.2 million a year earlier, as revenue rose 6.3% to GBP5.15 billion from GBP4.84 billion in 2012.
In response, the firm increased its dividend 24% to 21 pence from 17 pence a year earlier, giving a full year dividend of 31 pence.
Travis said its markets began to show consistent growth in 2013, with the merchanting business the first to experience an improvement in its markets, which picked up in the second quarter. The merchanting business sells to trade buyers, rather than consumers.
The general merchanting division saw revenue increase 8.4% to GBP1.58 billion from GBP1.46 billion in 2012, as new housing activity continued to drive market volume growth.
Sales price deflation experienced in the first half, as expected, reversed in the second half of the year for the division. Demand for heavyside products improved, but a number of brick and block products experienced longer supply lead times. These supply constraints added to second half price inflation, as manufacturers increased prices in exchange for certainty of supply, the firm said.
The specialist merchanting business also recorded growth, with revenue rising 9.4% to GBP660 million from GBP604 million in 2012.
Revenue in the consumer division increased by 2.4% in the year despite a challenging customer environment and adverse weather conditions throughout the first quarter. The division, which incorporates DIY store chain Wickes, posted revenue of GBP1.18 billion from GBP1.15 billion a year earlier.
Travis Perkins said Wickes has continued to invest in lower prices through its "red pencil price reduction programme" and stronger promotional deals. Consequently, Wickes price investment accelerated in the second half with volumes growing. However, gross margins were impacted by these investments. Improvements in sourcing, changes in the distribution of ordered bathrooms and the removal of the Mycard reward programme helped reduce the impact of the greater price investment and deeper promotional offers, Travis Perkins said.
The firm said demand for domestic plumbing and heating products grew steadily during the year as house builder activity increased. Revenue for the plumbing and heating division rose 6.0% to GBP1.73 billion from GBP1.63 billion a year earlier.
During the period, the company acquired Solfex which distributes sustainable solar and heating product installation packages, followed by a 51% stake in an unnamed online business distributing heating products. The firm did not disclose the purchase prices of either but said integration is going well.
Despite an encouraging outlook for 2014 Travis Perkins said it will monitor the market carefully for any sign that recovery may be slowing.
"Lead indicators suggest that an improvement in the level of housing transactions is well underway with mortgage approvals increasing and consumer confidence growing, although still negative. End-user markets are also showing improving signs and the group's analysis suggests that in 2014 only new build in the public sector will continue to contract," it said.
The stock was trading at 1,936.00 pence early Wednesday morning, down 27.00 pence or 1.4%.
By Anthony Tshibangu; [email protected]; @AnthonyAllNews
Copyright © 2014 Alliance News Limited. All Rights Reserved.
Related Shares:
Travis Perkins