Travis Perkins Profits Hit by Housing Market Slowdown Due to Rising Mortgage Rates

Builders’ merchant Travis Perkins has reported a significant impact on its profits due to a stalled housing market caused by increasing mortgage rates.

The company faced challenges in the first half of the financial year as inflation persisted and interest rates rose, leading to decreased demand for new-build housing work and renovation projects.

Sinking Profits and Revenue Dip:

Travis Perkins experienced a 32% decline in operating profit, totaling £107 million in the first half of the financial year, compared to £157 million in the previous year.

Despite this, the retailer managed to keep its revenue dip relatively low, with a decrease of only 2.5% over the same period.

Effects of Higher Borrowing Costs and Cost-of-Living:

Higher borrowing costs and the rising cost-of-living have constrained homeowners’ budgets, resulting in notably fewer sales of pre-owned homes.

Additionally, demand for new-build properties and extensive renovation projects from existing homeowners also suffered.

Managing Inflation and Cost Control Measures:

The company faced persistent inflation during the first half of the year, primarily driven by the pressure to increase wages for staff.

Nevertheless, Travis Perkins managed to control costs across the group by implementing operational efficiencies, including greater use of technology, such as digital invoicing to replace paper-based processes.

Resilient Demand in Certain Sectors:

While the housing market slowdown has affected certain segments, the group continues to see resilient demand in other areas, particularly in long-term projects within the commercial and infrastructure sectors.

There is also a backlog of work being addressed across the private sector, particularly in social housing, education, and healthcare.

Outlook and Expectations:

Despite the ongoing challenges, Travis Perkins anticipates demand to remain subdued during the second half of the year, leading to a continuation of falling revenues.

The company’s chief executive, Nick Roberts, acknowledged the difficult near-term trading conditions but expressed optimism about the group’s positioning to benefit from long-term structural drivers in its end markets.

He highlighted the potential in opportunities to decarbonize properties in the UK and address the shortage of private and social housing.