Margins under pressure at Travis Perkins - UPDATE

12th Oct 2012 07:14

Building materials supplier Travis Perkins saw like-for-like sales fall back in the group's third quarter (to end-September), as the group struggled with the poor weather and the competing attraction of the Olympics. Total sales in the quarter were down 2.4% year-on-year, although the group noted that the quarter this year had one less trading day.Like-for-like (LFL) sales per trading day were down 3.5% on the corresponding period of last year."Trading improved in September after the uneven and fragile trading conditions experienced so far this year, and our continuing tight management of costs and efficiency gains from self-help projects mean we remain on target to meet market expectations," said Geoff Cooper, the group's Chief Executive. LFL sales were actually up in the Specialist Merchanting side of the business, rising 1.3% from a year earlier. However, General Merchanting saw LFL sales per trading day slide 1.5% while Plumbing & Heating saw a 4.7% fall-off. The Consumer-facing part of the business suffered most of all, with LFL sales per trading day down 7.0%.The continuing low inflation environment has limited Travis Perkins's opportunities to drive stock investment gains. This, in addition to competitive market conditions in the three Merchanting divisions, has seen gross margins come under pressure during the third quarter, prompting an intensification of cost-control initiatives.The group said it remains on course to achieve its debt target of £450m by the year-end. At the end of June, net debt stood at £563m.Andy Brown, an analyst at Panmure Gordon, has recommended Travis Perkins as a buy with a price target of 1200p. In remarks to Sharecast he said: "for a company that has confirmed it is trading in-line with expectations the drop today is the wrong reaction. With the shares trading at a discount to its peers we stay positive."In a separate announcement, Group Financial Director, Paul Hampden Smith, has announced his intention to retire from the board early next year. He has been with the company over 20 years and intends to pursue a portfolio career. He will stay with the company until September 2013 to ensure a proper handover.