Higher interest rates weigh on demand for builders’ merchant Travis Perkins

Builders’ merchant Travis Perkins has felt the impact of a housing market stalled by rising mortgage rates as it reported sinking profits. The retailer said that it had experienced a ‘challenging’ first half of the financial year as a result of persistent inflation and subsequent interest rate increases. This has resulted in less demand for new-build housing work and renovation projects, the company said. It reported a 32% drop in its operating profit to £107 million in the first half of the financial year, from £157 million last year. The firm, which sells building materials and tools, said revenues dipped by just 2.5% over the period. Higher borrowing costs and the rising cost-of-living has squeezed homeowners’ budgets and resulted in ‘notably fewer’ sales of pre-owned homes, the company said. It also weighed on demand for new-build properties and large renovation projects from existing homeowners. Travis Perkins said inflation remained high over the first half of the year, primarily because of pressure to raise wages for staff, but that it had been controlling costs across the group. This has partly been achieved through operational efficiencies including the greater use of technology, for example, to remove paper invoicing. Furthermore, the group said it continues to see ‘resilient’ demand in other areas with well-funded long-term projects across the commercial and infrastructre sectors, and a backlog of work being addressed across the private sector, particularly in social housing, education and healthcare. But it is expecting demand to remain ‘subdued’ in the second half of the year, and revenues to continue falling slowly. Nick Roberts, Travis Perkins’ chief executive, said: ‘Market conditions have been challenging, which is reflected in both our first half performance and our outlook for the balance of the year. ‘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.’ He added that the opportunities to decarbonise properties in the UK, and the shortage of private and social housing, remain significant.