The prolonged slump experienced by the UK’s building industry is not showing any signs of lifting, with builders’ merchant Travis Perkins (TPK) and brickmaker Forterra (FORT) both issuing profit warnings on Wednesday, while window maker Safestyle UK (SFE) has appointed a restructuring company.
Travis Perkins said it has “continued to experience challenging market conditions” given the slowdown in the residential new build and refurbishment sectors, with like-for-like sales down by 1.8 per cent in the third quarter, although this was due more to falling prices than volumes.
It reduced its full-year adjusted operating profit forecast to £175mn-£195mn, down from £240mn at the half-year stage.
Jefferies analyst Priyal Woolf noted the importance of the September-November period for profit generation, given there is little activity in August and December and 52 per cent of annual operating profit comes from the second half. "The guidance cut reflects pass-through of commodity deflation, but also a margin squeeze from stock losses, which has driven 25 per cent of the downgrade," she added.
Forterra said demand for bricks continued to weaken, recording an industry-wide decline of 28 per cent year-on-year for July and August, with its own despatches softening further in September.
Current demand is “running below the levels seen in 2009”, the brickmaker said. It also said cash profit would be lower than expected – broker Peel Hunt cut its forecast by 10 per cent to £61mn.
Forterra also said it was working on the assumption that demand will remain subdued next year and is consulting with workers ahead of mothballing another brick factory at Claughton in Lancashire. It has already mothballed one plant this year at Howley Park in Morley, near Leeds. Travis Perkins shares fell by 9 per cent in early trading and Forterra shares were down 8 per cent.
Meanwhile, window maker Safestyle said it had appointed turnaround specialist Interpath Advisory to explore options, which include an injection of new cash, or a potential sale of the business and its assets.
The company said last week that it had held talks “with both existing shareholders and other third parties” about strengthening its balance sheet, as it is on track to breach banking covenants before the end of the year.
After markets closed on Tuesday, it said “a number of interested parties” had declared an interest in the business. Safestyle’s shares, which have fallen in value by 90 per cent since the start of the year, were up by 5 per cent on Wednesday morning.
