Travis Perkins set to raise £300m
Builders' merchant Travis Perkins joined the rush for shareholder cash today by announcing details of a £300m rights issue.
Travis Perkins: More cash calls are expected.
The group, which owns DIY chain Wickes, said it would use the proceeds to reduce its £985m debt pile and invest in its core businesses.
Travis Perkins expects markets to weaken until 'at least the third quarter of 2009' and said like-for-like sales in the last four months fell 14.4%.
This was despite a strong performance by Wickes after significant gains in the kitchen and bathroom sector and a successful Easter trading period.
More cash calls are expected in the coming weeks as firms exploit better market conditions to repair or bolster their balance sheets.
As well as Travis Perkins, newspaper reports at the weekend said Debenhams and housebuilder Redrow were mulling the offer of new shares.
Housebuilder Taylor Wimpey and private equity firm 3i stepped forward on Friday with initiatives to raise £510m and £700m respectively. The pair said they were keen to position themselves for future investment opportunities, particularly at a time of depressed valuations.
The second wave of rights issues follows fundraising moves earlier this year by the likes of HSBC, William Hill and a number of property companies.
With debt set to fall to around £600m, broker Numis Securities said the rights issue by Travis Perkins removed any concern that the group will breach banking covenants. That will mean Travis continues to pay lower interest on its debt for the next four years at a time when many UK companies have had to renegotiate debt facilities on more onerous terms.
Numis analyst Howard Seymour added: 'We argue that Travis is well placed to benefit from early cycle recovery as UK residential transactions improve, but at this time the uncertainties remain the impact of rising unemployment and weak repair and maintenance activity.'
As well as Wickes and Travis Perkins, the company operates as Tile Giant, Keyline Builders' Merchants, City Plumbing Supplies, dry lining and insulation distributor CCF and kitchen and joinery business Benchmarx.
More than half of the group's revenues is derived from repair and maintenance work in domestic, commercial and public sector buildings.
While like-for-like sales were down 19% in merchanting, the group said it had been successful in protecting margins by passing on the majority of product cost increases and avoiding the need for low margin sales.
At Wickes, trading in the kitchens and bathroom sector has been helped by the demise of competitor MFI at the end of last year.
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