Home Business NewsBusiness Travis Perkins warns on profits

Travis Perkins warns on profits

by LLB Editor
16th Jun 23 10:22 am

John Carter, when he was boss of Travis Perkins, used to say the health of the housing market was far less important to the business than repair, maintenance and improvement (RMI) demand for existing homeowners.

His argument was that you don’t need a sale or a purchase of a property to spend money with the builders’ merchant, and that RMI demand was less governed by the direction of interest rates.

AJ Bell’s Russ Mould said: “He also said new build homes were more of a sideshow for Travis Perkins than existing housing stock, calling work for the big housebuilders ‘padding’ and not that profitable.

“While Carter is no longer chief executive, it’s clear from Travis Perkins’ latest trading update that his argument would not stand up today.

“In its profit warning, the company cited weaker volumes in new build housing and private domestic RMI markets being affected by higher interest rates, together with weaker consumer confidence amid high levels of inflation.

“During the pandemic, countless households splashed the cash to do up their property, given they were spending so much time at home and wanted it to look nice. This caused a backlog of work for builders, hence why the boom lasted way beyond the easing of the pandemic.

“Sadly, we’ve got to the point where interest rates have gone up so much, so fast, that many homeowners can no longer afford home improvement projects. For many, mortgage payments have become punishing if they’ve rolled off a fixed rate deal in the past six months or so, and others are watching their pennies closely for fear that rates aren’t going to fall back any time soon.

“Yes, there continues to be a shortage of housing in the UK, but more important to Travis Perkins now is the ability and willingness for the consumer to spend money. A more resilient economy is helpful, but pressures on family finances may not ease for a while which means the builders’ merchant needs to be more realistic on earnings expectations.”

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