Wickes owner Travis Perkins yesterday raised the spirits of investors after profits beat expectations and it forecast a recovery in market conditions.
The Northampton-based company reported a 0.4 per cent boost in pre-tax profits to £110.4 million, despite struggling sales at its Wickes chain, which it acquired in February last year.
Travis, which opened its 1,000 site in June, said an upturn in the housing market had prompted hopes of a "gradual improvement" in the builders merchant and DIY sectors for the second half of the year.
Investors reacted favourably to the positive forecast with the firm's shares up seven per cent at 1635p. Travis Perkins said it has secured its targeted year two synergy and buying gains from the acquisition of Wickes - and those targets are some £20 million more than the synergies seen when the deal was first announced.
The group's operating margin fell from 10.6 per cent to 9.9 per cent, mainly reflecting the impact of Wickes' structurally lower margin, and the full year effect of trade pricing started at the end of the second quarter in 2005.
Turnover for the period rose 9.3 per cent to £1.41 billion. It said this mainly reflected an extra six weeks trading at Wickes and the impact of its branch expansion programme.
Basic EPS (earnings per share) was 63.3 pence, up 2.4 per cent.
Travis Perkins announced an interim dividend of 12.1 pence per share, compared with 11 pence a year earlier.
The group said that apart from the slow market recovery, all other aspects of the Wickes transaction have proceeded as expected and it confirmed its plans to expand its estate.
It also said its network expansion programme had continued to deliver good growth to all its merchant and retail brands, with 19 new branches added in the first half.
The company added that the rate of the recovery in the retail market was being held back by further pressures on consumers' disposable incomes, although a stronger housing market over the past winter boosted the trade market, where repair and maintenance activity increased.
It said activity levels in both its markets were lower in the first half of 2006 than in the comparable period in 2005, but measures to improve customer service, product ranges and operational performance helped grow market share on a like-for-like basis in both its divisions.
This, together with its branch expansion programme, enabled the company to continue capturing scale benefits.
Like-for-like free cash flow, before expansionary capital expenditure, special pension contributions and dividends rose 55 per cent and it generated £110 million of cash in the period.
Geoff Cooper, Travis chief executive, said: "We have delivered improved group operating profits, profits before tax, earnings per share and cash flow.
"Both our merchant and retail divisions have achieved increases in market share, profit before tax and productivity."