Monday, May 11, 2009

Travis Perkins' shareholders to put £300m of cash into its coffers

Travis Perkins, the builders’ merchant, has announced a rights issue and will print new shares that it will sell, thereby raising £300m in cash.

The deal to Travis’s existing shareholders is a 7-for-10 offer (they can buy seven of the new shares for every 10 already owned).

The move will see the creation of 86m new Travis shares at a price of 365p which is a 52% discount to the closing price of 754p on 8 May 2009, the last business day prior to announcement of the somewhat anticipated move.

Travis said: that the weakening economic conditions which started in 2008 and have continued since then have eaten into operating performance.

During 2008, Travis swung the axe with cost reducing and brought in cash-generating initiatives.


Travis Perkins shareholders to put £300m of cash into its coffers


As a result heads rolled, capital expenditure went out of fashion, working capital was cut back…and even shareholders took a little pain by forgoing their final dividend.

None of those moves proved a complete answer, hence the need for more cash.

A trading update this morning indicates that:

group turnover in the four months to the end of April was 14% down merchanting operations had seen an 18% drop (or 19% on a like-for-like basis) retail sales down 2% in the 18-week period to 2 May kitchen and bathroom sales up 13%

Travis has a net debt of £980m already and the board said it “expects the group's markets to continue to weaken until at least the third quarter of 2009.”

Geoff Cooper, chief executive, said: "The rights issue will strengthen the balance sheet and position the group to be ready to take advantage of opportunities when markets eventually recover.”