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Travis Perkins sags after plumbing disappointment

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Builders' merchant Travis Perkins (LON:TPK) saw sales growth slow in the third quarter of the year.

Like-for-like (LFL) sales were up 5.7% on a year earlier, down from 10.2% at the halfway point of the year.

LFL sales for the first nine months of the year was pegged back to 8.6%, with growth in all three of the group's trading divisions, though the General Merchanting arm, trading under the Travis Perkins brand did best, with nine month LFL sales up 13.3%.

The owner of the Wickes DIY chain said its Consumer group's LFL sales in the first nine months of the year were up 6.7% year-on-year, while the Plumbing & Heating arm was up 3.0% and the Contracts business, which supplies larger trade buyers, was up 10.6%.

Management conceded the performance of Plumbing & Heating was weaker than expected, but put this down to disruption caused by reconfiguration of the branch network.

The Government-led incentive schemes pulled forward significant boiler installations in the second half of 2013 and first quarter of 2014. This, combined with a later start to the plumbing and heating season - Travis Perkins's nod to the traditional blaming of the British weather for under-performance - has resulted in market volume declines.

"Trading has remained strong for most of our businesses and the group's continued good performance is underpinned by the successful introduction of a number of self-help initiatives," said John Carter, Travis Perkins's chief executive.

"We have outperformed our markets whilst making strategic investments that we are confident will support continued market share gains," he added.

Broker Cantor Fitzgerald said the statement looked good, helped by some heavy duty expectations-dampening by Travis Perkins's management.

"Management has been vocal in expecting a H2 slowdown this year, but sales in Q3 were up 6.9% (5.7% like-for-like) within all divisions outside of plumbing and heating growing. Furthermore, other growth avenues accelerated - network growth was good - 75 new branches (45 of which are infills) exceeds the 50 guided for the year, plus an additional 20 new tool hire operations have been launched inside existing branches," the broker said, as it reiterated its 'buy' recommendation.

The shares, down 2% today at 1,604p, are off 19% from the February peak and are now trading on 12.3x projected fiscal 2015 earnings, which is cheap in Cantor's view for a stock targeting double digit percentage annual growth).

Wealth management firm Killik is another fan.

"We continue to like the Travis Perkins’s investment case given its strong exposure to the UK housing market and more specifically, the home improvements market, where strong growth is expected, given house price trends," it said.

Quick facts: Travis Perkins

Price: 1491.5 GBX

LSE:TPK
Market: LSE
Market Cap: £3.76 billion
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