Oct. 16 (Bloomberg) -- Travis Perkins Plc, the U.K. building materials distributor that owns the Wickes home- improvement chain, fell the most in 19 years in London trading after saying it plans to scrap its dividend to hoard cash.

The British supplier of cement, tools and paint dropped 31 percent to 330.25 pence, the biggest slide since at least May 1989. The company will cut costs by 65 million pounds ($112 million) to reduce debt, it said today.

Cost-cutting will help offset the ``steeper decline'' in construction expected to befall the industry, Chief Executive Officer Geoff Cooper said in an interview. Royal Bank of Scotland analyst John Messenger said Oct. 10 Travis is faced with breaching loan agreements next year if it doesn't negotiate new terms or raise additional equity. Banks have already committed to five-year credit lines so no change to existing covenants is necessary, Cooper said.

``The passing on the dividend is what's caused the damage,'' Kevin Cammack, an analyst at Kaupthing Bank Hf, said by phone. ``The focus is trying to keep within covenants. It's a tight call whether they will do so. The collapse in housing starts is catching up with them now.''

Sales at the group's merchanting division, which supplies builders, has slumped 10 percent on a like-for-like basis in the past two months, as people delay refurbishments and U.K. housing starts fall to the lowest in peacetime since the early 1920s.

Low End of Estimates

Pretax profit will be around 210 million pounds this year, Cooper said. That will miss a consensus analyst estimate of about 220 million pounds, he said.

Building may not grow again until 2011, the Construction Products Association, which represents 85 percent of the industry's suppliers, said Oct. 2. That's reversing a 10-year building boom, when more than 100 billion pounds of new orders for retail-related projects or offices were initiated.

``We've got trade work ready, but there have been a lot of delays,'' Cooper said in a phone interview. ``Builders are saying customers have the 5,000 or 10,000 pounds to spend, but the extraordinary changes in the financial sector are unnerving people. They don't want to spend the money.''

Travis's rival Wolseley Plc, the world's biggest distributor of plumbing and heating equipment, slumped 18 percent to 285.25 pence, also helping lead a plunge in construction-related stocks.

To contact the reporter on this story: Tim Barwell in London on tbarwell@bloomberg.net

Last Updated: October 16, 2008 11:59 EDT