The UK’s biggest building merchant Travis Perkins has warned of an “uncertain” recovery in the construction market after reporting huge losses.
In a stock market update on Tuesday (1 March), the FTSE 250 firm posted a pre-tax loss of £38.4m in the year ending 31 December 2024 – a drop of 131 per cent from the previous year’s profit of £121.4m.
This marks the third year in a row the building materials giant has reported declining profit. The firm said last year’s profit was damaged by lower sales and lower gross margins, the latter driven by price deflation and increased competition.
Revenue also dipped to £4.6bn, £200m less than the previous financial year.
The Northampton-based firm reported a “progressive deterioration” in its key markets, due to high inflation, rising interest rates and weak consumer confidence.
It added: “It is encouraging to see a more robust demand backdrop for some elements of the construction market.
“However, the pace and rate of an overall recovery in construction activity levels remains uncertain and will likely need further cuts to interest rates and an uplift to consumer confidence levels to stimulate a meaningful increase in demand.”
The firm’s results come a few weeks after chief executive Pete Redfern stepped down after six months in the role, citing ill health. Shortly after taking up the post, Redfern warned the business had become “distracted and overly internally focused”.
The results had been delayed by two weeks after the company’s auditor asked for “additional time to complete its standard audit procedures”.
Group chair and interim chief executive Geoff Drabble said: “It is clear to the management team that there are a number of areas where the business needs to refocus and change the way it operates in order to better serve our customers and effectively support our suppliers.”
Travis Perkins’ merchanting division performed particularly poorly, posting a 6.2 per cent drop in revenue, which the firm said arose from “depressed levels of UK construction activity and an intensely competitive backdrop”.
Revenue was hit by price deflation in the first half of the year, driven by price reductions in timber, the firm wrote. Although this eased in the latter half, sales progressively declined throughout the year, which the firm said was partly driven by postponed projects caused by general election uncertainty and the delayed government Budget.
Julie Palmer, partner at insolvency specialist Begbies Traynor, said Travis Perkins’ results “highlight just how tough things have been for the UK construction sector, with demand still weak and price deflation squeezing margins”.
She added: “A 23 per cent drop in [adjusted operating] profit is particularly hard reading and underscores the challenges facing the industry.”
Chris Beauchamp, chief market analyst at IG Group, said: “There was plenty of grim news in Travis Perkins’ update this morning, with the tone set by the use of the word ‘challenging’ right at the start of the update.
“The dividend cut adds to the gloom, and it looks like the company’s turnaround strategy is still in its early stages, providing little reason to go bargain hunting just yet.”
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Charlotte Banks