Travis Perkins warns of continued slowdown in housing spending
- The building materials supplier stated that sales were down 2.5% to £2.47 billion
- Travis Perkins sales boomed during the early part of the Covid-19 pandemic
- Rising inflation and interest rates have dampened demand for new-build homes
Travis Perkins has warned that demand in the new construction and renovation markets will remain ‘subdued’ this year against a difficult economic backdrop.
Weaker levels of house building and private home repair, maintenance and improvement (RMI) due to rising inflation and mortgage rates have hit trading at Britain’s largest supplier of building materials.
Sales for the Northampton-based group fell 2.5 per cent to £2.47 billion in the first six months of 2023, with growth in the Toolstation business offset by falling sales in the trade segment.
Slowdown: Weaker levels of home construction and home renovation due to rising inflation and mortgage rates hit trading at Travis Perkins
In the latter division, which accounts for more than 80 per cent of sales, sales fell 4.5 per cent to £2.06 billion despite strong orders from the commercial, infrastructure and public sector markets.
Travis Perkins has benefited from a boom in real estate construction and renovation spending during lockdowns, alongside low interest rates and a temporary stamp duty holiday, to weather a more difficult 18 months.
Trade has weakened as inflation-pressed incomes and successive Bank of England rate hikes dampened mortgage approvals.
Travis Perkins expects this slowdown to continue into the second half of 2023 given the pessimistic outlook for the UK economy.
As a result, it expects full year revenues to decline by a low single digit figure, reflecting declines in both volumes and prices.
The company also expects to post an adjusted operating profit, which has shrunk by 31 percent in the first half, to around £240 million, compared to £295 million in 2022.
Nick Roberts, chief executive of Travis Perkins, said: “Market conditions have been challenging, which is reflected in both our performance in the first half and our outlook for the remainder of the year.”
However, he added: ‘While short-term trading is expected to remain difficult, we continue to work to position the group to take advantage of the long-term structural factors in our end markets.
“The opportunities presented by the demand to decarbonise the UK’s built environment and address the shortage of both private and social housing remain significant.”
Travis Perkins noted that there remains a “significant backlog” of work in the public sector, especially in areas such as healthcare and education, as well as healthy demand for RMI projects in the industrial market.
Travis Perkins Stocks were 2.25 percent, or 19.6p, higher at 890.4p late Tuesday afternoon, making them one of the top ten performers on the FTSE 250 Index.