Travis Perkins cuts forecasts as profits fall by a third

Travis Perkins has cut its full-year profit forecasts after group profits fell by a third in the first half of the year.

The UK’s largest building materials supplier reported a 33 per cent fall in adjusted operating profit to £75 million year-on-year in the six months to 30 June

Higher interest rates and weaker UK consumption have left Travis Perkins with a difficult two years behind it, with the company previously warning that a slowdown in construction activity ahead of the election would hit its financial results.

However, new data released on Tuesday also raised hopes for a recovery in the construction sector, which supported Travis Perkins shares.

The FTSE 250 company revised its full-year profit forecast to around £150 million, down from previous estimates of between £160 million and £180 million.

The Northampton-based company saw revenue fall 4.4% to £2.3bn in the first half of the year.

Travis Perkins and its peers in the sector have seen their results deteriorate for more than a year due to the slowdown in construction.

The UK housing market has slowed due to high interest rates, which has discouraged home building and property transactions that often require renovation and modernisation work.

Reduced disposable income has also meant that consumers are no longer spending as much on their properties.

However, with the Bank of England finally cutting interest rates from 5.25% to 5%, it remains an open question what impact this will have on future mortgage rates.

Although investors expect the impact in the short term to be “rather moderate.”

Following the update, Travis Perkins shares fell 1.7% to 865 pence in morning trading on Tuesday.

However, they recovered losses and traded broadly unchanged throughout the day after new data showed a recovery in the UK construction sector following the general election.

The S&P Global UK Construction Purchasing Managers’ Index showed the fastest growth in activity in more than two years.

The index rose to 55.3 – its highest level since May 2022 – from 52.2 in June and far exceeded economists’ forecasts of 52.8.

Travis Perkins chief executive Nick Roberts said: “While market conditions have impacted our trading margin, we have made good progress in managing our overheads and generating cash.

“With the new government rapidly unveiling its plans for planning reform to deliver more housing and infrastructure, and with expectations of improving macroeconomic conditions, the group is focused on ensuring it is well-positioned to maximise the benefits of both the future recovery in demand and the longer-term requirement to expand and decarbonise the UK housing stock.”

Last month the group announced it had hired former Taylor Wimpey boss Pete Redfern as its new chief executive.

Redfern replaces Roberts, who leaves after a difficult five-year spell in charge.

Travis Perkins’ profits fell by about 80 per cent to £38m last year as rising interest rates and pressure on the cost of living led to reduced demand for new builds and renovations.