Travis Perkins slashes profit outlook as interest rates hit housing market

A weak housing market has hit builders’ merchant Travis Perkins, forcing it to cut back profit expectations to levels that not even its most pessimistic analysts had foreseen.

The business said that its performance in the first quarter of the year had been resilient, but the bounce-back it was expecting in a tough market did not materialise in the second.

“The group delivered a resilient performance in the first quarter but has not seen the anticipated easing of market conditions in the second quarter to date,” it said in an update to shareholders on Friday.

This means that bosses now expect that adjusted operating profit will reach around £240 million this financial year, instead of the £272 million they had guided back in April.

By early afternoon in London shares were trading down around 6%.

It is less than even the lowest estimate by analysts, who thought that adjusted operating profit would reach £254 million. The most optimistic analysts had forecast Travis Perkins’ profit at £281 million.

The company is facing a tough time in a market rocked by inflation and spikes in interest rates which are putting a chill on the housing market.

Travis Perkins rents and sells tools and other building items to builders and construction companies across the UK.

The business said that the £29 billion repair, maintenance and improvement (RMI) market had also been hit.

“Volumes in both the new build housing and private domestic RMI markets continue to be impacted by higher interest rates and weaker consumer confidence driven by persistent, higher than anticipated consumer price inflation,” it told shareholders in a short update on Friday.

“Assuming that the present conditions persist for the balance of the year, management now expects to deliver a full year adjusted operating profit of around £240 million.”