Travis Perkins nosedives after new profits warning
THE home improvement market was floored by Travis Perkins’ second profit warning in four months and mounting fears that MFI may be forced to launch a heavily discounted rights issue.
Travis Perkins’ foray into the retail end of the market looked ill- conceived after the builders’ merchant revealed a sharp fall in sales at Wickes, the DIY group it bought for £950m last December.
Underlying sales at Wickes dropped 9pc in the four months to the end of October, compared to a 6.2pc decline in the first 10 months of the calendar year.
The retailer’s woes could signal the end of the DIY phenomenon fuelled by TV makeover shows such as the BBC’s Changing Rooms.
Travis Perkins’ chief executive Geoff Cooper blamed a price war for Wickes’ wobble.
He said: ‘Wickes offers better value for money on DIY lines, so our competitors have been promoting products very hard. Wickes has been caught in the crossfire.’
News that market conditions had worsened ‘signifi- cantly’ since mid- October added to the group’s gloom, prompting it to warn that full-year profits would come in at £ 205m, £ 20m short of analysts’ forecasts.
This sparked a series of downgrades and sent share prices reeling across the sector. Travis shares fell 129p to 1284p.
Shares in B& Q owner Kingfisher fell 33⁄ 4p to 2143⁄ 4p.
But MFI took the brunt, suffering a 13pc fall as its shares plummeted
121⁄ 4p to 71p.
Analysts expressed concern about the outlook for Howdens, MFI’s trade business.
One said: ‘ MFI is already close to breaching its borrowing limits after the alarming slump in its retail operations.’
The company’s predicament led to speculation that it may be forced to raise funds via a rights issue.
MFI is expected to update investors at the end of November about its strategy.