Building materials supplier Travis Perkins Plc (TPK.L) said Thursday that it expects 2009 earnings to be at the upper end of market expectations, helped by a better-than-expected trading for the last two months. In a trading update ahead of its year ending December 31, the builders' merchant, however, said that turnover for the eleven months to the end of November declined from last year. The company also issued a cautious outlook for 2010.
The UK-based company operates in two business divisions: Builders Merchanting and Retailing. Along with its subsidiaries, Travis Perkins is principally engaged in the sale of timber, building materials, plumbing and heating products, as well as the hiring of tools to the building trade and industry.
Group turnover for the 11-month-period ended November declined 8.5% from last year. In the merchanting division, total turnover for the period was down 13.3% and like-for-like turnover per trading day was down 14.3%. However, the decline in like-for-like sales for the last two months improved to 5.5% due to easing of year-over-year comparatives.
In the segment, the decline in volume relative to peak levels in early 2008 appears to have reached a plateau, Travis Perkins said, adding that there are no signs yet of any sustained improvement. Gross margin pressure remained consistent with the trend experienced throughout 2009.
In the merchanting division, total turnover in general merchanting was down 13.6% and like-for-like turnover per trading day was down 14.8%. During the period, total turnover in specialist merchanting declined 12.7% and like-for-like turnover per trading day dropped 13.5%.
Most of the turnover in the retail division comes from Travis Perkins' home improvement store chain Wickes, where total turnover for the 48-week-trading-period to November 28 rose 2.6%. Like-for-like sales per trading day at Wickes were up 2.3%, with core products down 1.4% and showroom sales up 23.1%. During the nine-week-period to November 28, Wickes made strong market share gains, with total like-for-like turnover per day rising 10.2%.
The home improvement retailer said recent trading trends confirmed its view that the merchanting market has stabilised and the retail market has continued to enjoy a steady revival in activity.
Travis Perkins managed to achieve the anticipated overhead savings during the period, helped by cost control. Net debt decreased further during the second half of the year.
''These sales trends mean that Group trading for the last two months since our October Interim Management Statement is a little ahead of our expectations. This, together with further one-off employment related savings, means that we now expect earnings to be at the upper end of market expectations for 2009,'' Travis Perkins said.
However, accounting for the probable pressures on consumer and trade spending in 2010, the company reiterated its cautious outlook for 2010. It had previously said that there will be no significant upturn in construction activity before the end of 2010.
Travis Perkins said today that its view of the current market consensus for 2010 also remains unchanged.
Earlier, in September, the company had said that it witnessed a 11.0% decline in turnover for the nine-month-period. Like-for-like turnover per trading day dipped 16.3%, as total turnover in Travis Perkins' merchanting division came down 15.6%.
TPK.L is currently trading at 814.50 pence, up 15.00 pence or 1.88%, on 6.04 million shares.
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