Builders merchant giant Travis Perkins plc (TP) is forecasting the markets it trades in overall to shrink by 25% in 2009.
In its preliminary results for 2008, the company says that the coming year is likely to prove “very tough” for the UK construction sector.
“We see little prospect of a return to market growth this year and limited prospects for a return to grown in 2010,” it said.
TP predicts that its own sales will fall by less than the market as a whole thanks to “market share gains and maturing performance from recently opened stories”. But it acknowledges that turnover is already down sharply this year. Like-for-like sales per trading day in its merchanting division were 15.8% lower in January, while for its retail division like for like business in the first five weeks of the year fell 12.2%.
The company’s pre-tax profits for 2008 were down 44% at £146m on turnover 0.3% lower at £3.18bn.
“Our businessses continue to outperform competitors and in 2008 our divisions grew market share on a like-for-like basis and continue to record leading operating margins in each market segment – a particular advantage at this stage of the cycle,” said chief executive Geoff Cooper. “A number of competitors have closed outlets and we expect further sector rationalisation, improving our prospects for continued market share gains.”
He said that the company had already introduced measures to cut costs, with full-time staff equivalent posts down 2,500 on a year ago, and 300 vehicles “eliminated” from its transport fleet. Expansion plans have also been put on ice. Dividend payments have been suspended “until prospects for the group are more positive”.
Mr Cooper said TP was “ready to take further steps if necessary” in response to “downside scenarios”.
If the market conditions developed as the company expected, he said it did not envisage making a cash call to shareholders. But he added: “If we’ve got it seriously wrong then, at some point, we’ll have to look at the company’s capital position.”
He said that options in such a scenario would include a rights issue, property disposals or reaching an agreement with the firm’s banks to waive their covenant tests for a period.
