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Travis Perkins predicts RMI downturn

Builders’ Merchants Travis Perkins predicts the downturn will hit the repair, maintenance and improvement market (RMI) in the second half of 2008 and into 2009.

The company’s interim results for the first six months of the year said elements of the market which have been performing relatively strongly despite the collapse of the housing market were about to feel the knock on effects.

The company which saw a 3.2 per cent drop in profits despite a growth in revenue is expecting to cut back on staff and slow down store expansion plans.

The report said: ““In contrast to housing, activity levels have been strong in the government and commercial construction sectors and have held up well for general RMI work both in the retail DIY market and in the merchanting market

“We now expect that the very negative trends in mortgage approvals, secondary housing transactions and new domestic construction will result in a contraction in the RMI market in the second half of 2008 and into 2009. We also now expect that this contraction will be more rapid than previously expected.

'In contrast, contractors' forward order books for large construction projects, boosted by the Olympics and Thames Gateway programmes, indicate we can expect this source of business to remain firm in 2008, but with a contraction beginning in 2009.”

The half year results showed revenue was up 5.4 per cent to £1.67 billion, operating profit was up 0.2 per cent to £155.8million, while profit before taxation was down 3.2 per cent to £124.5million.

Geoff Cooper (pictured), Chief Executive, said: “As we anticipated and observed in our last full year results statement, 2008 has become a more challenging market and we expect our markets to weaken further as the year progresses.

'We expect to continue to gain market share on a like-for-like basis across our merchanting and retail brands which will partially compensate for lower market activity.

'The Group will also continue to take action to counteract market conditions and accelerate the reduction on net debt through a combination of lowering overheads and by reducing both working capital and constraining capital expenditure.

'Whilst the outlook is more challenging than we have experienced for some years, we have the management and resources to deal with these difficulties and position the Group for further growth when more favourable conditions return.'