Travis Perkins 150p share price dive

Travis Perkins suffered a one-third slump in the value of its shares yesterday, down 150p to 330p, as punters responded to concerns that it could breach banking covenants next year.

A breach of these covenants would allow the banks to recall their £1bn of loans.

What triggered the issues was a warning from chief executive Geoff Cooper that: “The more difficult the trading outlook, the closer we get to covenant levels set by the bank. It’s important to make sure we won’t have a problem in the future.”

Cooper warned that profits for 2008 will be at the bottom end of City forecasts.

Latest reactions to the market situation include:

• Scrapping the final dividend.
• £65m of annual cost savings – in other words a raft of job cuts.

The wobbly spread to TP’s competitors, the domino effect resulting in knock-on impact at:

• Plumbing giant Wolseley which lost 60p (down to 285p).

TP employs 14,500 staff in its 1,200 outlets.

The company has over £910m of debts. A deal in April resulted in it securing a £1bn loan with a syndicate of banks led by Royal Bank of Scotland and Barclays.

Today, TP has a total funding that runs to £1.2bn with the balance being provided by long-term loans from American insurance companies.