Travis Perkins expects housing market woes to hit profit

FILE PHOTO: FILE PHOTO: Signage is pictured at Travis Perkins, a timber and building merchants yard in St Albans·Reuters
Reuters
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LONDON (Reuters) -Building materials company Travis Perkins expects British housing market weakness to hit profit this year, it said on Friday in the latest warning sign that rising interest rates are beginning to squeeze homeowners.

The company said that rising mortgage rates and high inflation have prompted the construction industry to hold back from building new homes and that Britons have been delaying extension projects and refurbishment of existing properties.

Travis now expects 2023 adjusted operating profit to be about 240 million pounds ($307 million), a downgrade from April guidance that said it was on track to meet market forecasts of about 272 million pounds.

Shares in the company lost about 6% of their value in mid-morning deals, falling to 818 pence - lows last reached in October, when former Prime Minister Liz Truss's mini-budget sent housing market alarm bells ringing.

British households have so far proven surprisingly resilient to sharp increases to prices of everyday goods and the rapid rise in interest rates that has lifted mortgage costs, but there is evidence that is starting to change.

Stubbornly high inflation means lenders have begun repricing home loan offerings, spurred by expectations of further rate hikes from the Bank of England.

Worries over higher mortgages now appear to be feeding through to the housing market, with Travis highlighting the impact on volumes in new-build housing and private domestic building projects.

Travis said the other half of its business, which serves large commercial and public infrastructure projects, was showing more resilient demand.

Investec analysts said that the Travis update was disappointing but understandable.

"In the near term, the focus is likely to return to the weaker profit outcome this year and worries around rising UK interest rates," the analysts said.

($1 = 0.7817 pounds)

(Reporting by Sarah Young in London and Aby Jose Koilparambil in BengaluruEditing by Rashmi Aich, Kate Holton and David Goodman)