Travis Perkins has warned demand in the new-build property and refurbishment markets is set to ‘remain subdued’ this year against a tough economic backdrop.
Weaker levels of housing construction and private domestic repair, maintenance and improvement (RMI) due to rising inflation and mortgage rates have hit trade at Britain’s largest building materials supplier.
The Northampton-based group’s turnover dipped 2.5 per cent to £2.47billion for the first six months of 2023, with growth in its Toolstation business offset by falling sales in its merchanting segment.
Slowdown: Weaker levels of housing construction and domestic renovations due to rising inflation and mortgage rates have hit trade at Travis Perkins
In the latter division, which provides over 80 per cent of business, revenue fell by 4.5 per cent to £2.06billion despite robust orders from the commercial, infrastructure and public sector markets.
Having benefited from a boom in property construction and renovation spending during lockdowns, in addition to low interest rates and a temporary stamp duty holiday, Travis Perkins has endured a more difficult 18 months.
Trade has weakened as a result of inflation-squeezed incomes and successive interest rate hikes by the Bank of England have dampening mortgage approvals.
Travis Perkins expects this slowdown to continue into the second half of 2023, given the UK economy’s pessimistic outlook.
As a result, it anticipates full-year revenues will decline by a ‘low single digit’ figure, reflecting falls in both volumes and pricing.
The firm also expects to post adjusted operating profits, which shrunk by 31 per cent in the first half, of about £240million, compared to £295million in 2022.
Nick Roberts, chief executive of Travis Perkins, said: ‘Market conditions have been challenging, which is reflected in both our first half performance and our outlook for the balance of the year.’
However, he added: ‘Whilst near-term trading is expected to remain difficult, we continue to work to position the group to benefit from the long-term structural drivers in our end markets.
‘The opportunities presented by the requirement to decarbonise the UK’s built environment and address the shortage of both private and social housing remain significant.’
Travis Perkins noted there remains a ‘significant backlog’ of work across the public sector, especially in fields like healthcare and education, as well as healthy demand for RMI projects in the industrial market.
Travis Perkins shares were 2.25 per cent, or 19.6p, higher at 890.4p on late Tuesday afternoon, making them one of the ten best performers on the FTSE 250 Index.
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