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The week ahead... Travis Perkins

The week will kick off with an interim management statement from Travis Perkins (TPK). Full-year results from the company were good, with adjusted pre-tax profits up 37% to £296.7 million. Group revenue increased 52% to £4.8 billion.

Good progress was made in its merchants division, with revenue up 11% to £2.3 billion and an EBITA margin of 8.6%. BSS reported £1.4 billion revenue and 4.6% margin. Retail revenue was flat at £1 billion and margins eased back slightly to 4.5%.

Management reiterated a tough outlook with the prospect of a "market softening" this year, but Andy Brown, analyst at Panmure Gordon, believes that "another year of solid progress" is likely due to self-help initiatives, market share gains and enhanced BSS synergies.

At the full-year results, the company reported a slightly better than expected debt of £583 million. Brown is forecasting further improvements to £460 million in the current year.

Despite the more than 20% rise in the share price year-to-date, Andy Brown has a 'buy' recommendation on the stock. "With an attractive valuation and forecasts/prospects underpinned by the acquisition of BSS, we see further potential for good news from the shares. Management has a strong record on tight cost control, essential in the current climate, and it continues to deliver best-in-class margins," he says.

Shares in the company are trading on a 2012 price to earnings (PE) ratio of between nine and 10 times, in line with its five-year historic average.

Source : Darshini Shah – Interactive Investor

12 May 2012
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