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Merchant's long road to recovery begins

Builders’ merchant Travis Perkins recently revealed a jump in annual profits but admitted activity in its core market remained 20% below its 2008 peak.

The group - one of the largest suppliers to the UK’s building and construction industry with a network of more than 600 branches - said it expected the merchanting sector to continue its gradual recovery this year, while conditions facing its Wickes DIY business were likely to remain soft.

Reporting underlying profits of £216.7 million for 2010, an increase of 20% on a year earlier, Travis said it had also made a positive start to 2011, albeit against easier comparisons with a year earlier.

Like-for-like sales in January were up by 22% in merchanting, 12% in retail and by 8% at the BSS plumbing supplies business it acquired last year. Sales trends in February have weakened but remain in positive territory.

The Northampton-based company added: “Despite starting the year well we expect conditions for the next 12 months to remain difficult.

“The merchanting market fell by over 30% from its peak in 2008 and although activity has picked up a little, from a longer term perspective, activity levels are currently around 20% below their peak.”

Travis said all 11 businesses in its portfolio outgrew their rivals and increased profits in 2010, while it described the acquisition of BSS for £558 million as a “major strategic step forward”.

With 439 branches in the UK and annual revenues of £1.35 billion, the deal made Travis the leading player in the trade and retail distribution of plumbing and heating products.

It was also the largest undertaken by Travis since the £950 million takeover of the Wickes DIY chain in 2005.

Across the group, revenues rose 8% to £3.15 billion - up 5% on a like-for-like basis - while profits including one-off items were £196.8 million against £212.7 million a year earlier.