Travis Perkins: 10% share price rise yesterday

Travis Perkins, the builders’ merchant, enjoyed at 10% share price rise yesterday.

That performance must have been welcomed by Travis shareholders who have seen shares halve in value in less than a year, dropping from £21.20 in May 2007 to a low of £10.20 at the close of trading on Monday this week.

Tuesday’s upturn saw them back at £11.50, but still with plenty mileage to go.

What made Travis stand out when other share prices were crumbling? Could the group’s performance yesterday herald the start of a general recovery in the value of shares in other companies in the construction sector?

In the City, the view is that Travis’s share price had been compressed so much that a lot of tension had built up and the American government’s decision to cut lending rates was the long-awaited trigger for an upturn.

While Travis doesn’t trade in America at all, analysts see pressure building on the Bank of England to offer similar moves and this would make Travis’s debt funding easier. It would also probably result in a return of confidence amongst buyers of Travis’s products.

The Stock Market over-reacted to a statement by Travis on 13 December when it said that while trading conditions were similar to 2005, in the present situation, however, the group has better resilience and it will outperform its rivals and take market share if difficulties continue.

That news prompted one stockbroker to clip 6% from its profit forecast for 2008. Even so, the resulting figure offered meaningful growth over the profit in 2007.

By contrast, the City over-reacted and Travis’s shares took a bath, dropping by 20% since that day, up until the close of play on Monday.