A brace of profit warnings from two major suppliers to the building trade put the City spotlight back on the wider impact of the slowdown in the housing market today.
Travis Perkins cut its guidance for the second time in three months as the slump in home moves and renovations outlasted the summer. It said September “saw a notable deterioration in market activity and sentiment”.
Forterra, the brickmaker, said it now expected demand in 2024 to stay at levels seen this year, as it pointed to a slowdown in August, with demand down from June, meaning its earnings would be “below previous expectations”.
Travis is the UK’s biggest builders’ merchant, running a 700-strong chain. It cut its outlook for annual adjusted operating profit to a range between £175 million and £195 million, down from £240 million, a forecast issued in July, that was itself lower than one of £272 issued in April.
It pointed to “the pronounced slowdown in new build housing and domestic RMI [repairs, maintenance and improvement] activity”, which persisted into the third quarter. Falling prices for some products as the wave of commodity inflation left the industry also took a toll on revenue.
Forterra has 17 factories and makes around 590 million bricks a year, as well as blocks, precast concrete and paving. It said that wider industry figures, as well as its own production levels, showed that “UK brick industry dispatches are currently running below the levels seen in 2009.” That was also a time of a major lull on the housing market, when the impact of the financial crisis hit the availability of mortgages.
The current slowdown in the housing market has tracked the long period of rising interest rates from the Bank of England, dating back to December 2021.
But both companies voiced confidence in their long-term prospects, with the national shortage of housing making a recovery likely.
Travis said the need for more homes in the UK was becoming “ever more pressing”. Forterra mentioned a “growing political focus on increasing housing supply ahead of a general election.”
Travis’ shares slumped 80p to 726p, the biggest faller on the FTSE 250. Forterra’s stock was down 10p at 133p.
