Travis Perkins lowers profit forecast on housing market slowdown
British builders’ merchant Travis Perkins has lowered its operating profit expectations for the full year as it grapples with a tougher trading environment and weaker demand in the housing market.
The Northampton-headquartered company said its full year adjusted operating profit is now projected to be about £150m, approximately six per cent below the market consensus.
The figure also falls nine per cent short of analyst estimates from Peel Hunt, who rated the stock a ‘hold’ following the update. Shares fell over 3.4 per cent in early trading.
For the first half of 2024, Travis Perkins reported a 4.4 per cent decline in revenue to £2.4bn. Adjusting operating profit plunged to £75m, down from £112m in the same period last year. The company attributed this slump to a 2.4 per cent drop in volumes across the group and the negative impact of price deflation on profit margins.
Gross profit fell by £50m, with £30m of the decline due to the lower volumes and £20m due to the price deflation.
Travis Perkins said its restructuring measures and tightened controls have helped cut overheads by £19m compared to the previous year, with cost inflation absorbed. Although it expects performance improvements in 2025, the company is anticipating a gradual recovery in housing volumes.
Outgoing chief executive Nick Roberts said trading conditions have “remained challenging” through the first half and he recognises that “a persistently lower volume environment means that we have to deliver a simpler, more efficient business.
“Whilst market conditions have impacted on our trading margin, we have made good progress on managing our overhead base and generating cash.
“With a new government quickly setting out its plans to reform planning to deliver more housing and infrastructure, and the expectation of an easing in macroeconomic conditions, the group is focused on ensuring that it is well placed to maximise the benefits from both a future recovery in demand and the long term requirement for the UK to expand and decarbonise its housing stock,” Roberts added.
A downturn in the house building market led to Travis Perkins’ profit being slashed by £175m during its latest financial year.
But Peel Hunt analysts said that the company’s incoming management team “could be a catalyst” for growth.
New boss Pete Redfern and chair designate Geoff Drabble, who are set to join the croup in September and October respectively, bring extensive construction sector experience and listed company expertise.