Profits halve as Persimmon feels housing pinch

Fewer than 10,000 homes were completed in 2023 by the York-headquartered housebuilder, as turnover fell from £3.8bn to £2.8bn.

Pre-tax profit for the year was logged at £351.8m, down from £730.7m in 2022.

The completion of homes was down by a third from the near-15,000 completed in 2022. The average sale price of a Persimmon new-build home went from £248,000 to around £255,000.

Dean Finch, group chief executive, said he expects 2024 to also be tough but that pent-up demand will lead to improved results.

Summing up the results, Finch said: “The Group successfully navigated the challenging market conditions in 2023. Completions were ahead of expectations, margins were industry-leading, we maintained our strong balance sheet and we continued to deliver further improvements in our product quality and service.

“Although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged. Customers want quality homes in the places where they want to live and work, and affordability is crucial.

“During the year we have continued to take further steps to strengthen the business and we are well placed to meet this demand through our three excellent brands offering different price ranges with overall private average selling prices that are below the market average. The investments and operational changes that we have made in the past few years mean that we are trusted by our customers to deliver consistently high-quality homes.”

Persimmon cut almost 300 jobs last summer, in an atmosphere of housebuilders struggling to deal with spiralling build costs and a turgid mortgage market.

Finch said that Persimmon can right the ship by “positioning the business to maintain industry-leading financial returns as markets recover, supported by our vertically integrated business model, strategic land buying and disciplined approach to cost control”.

He concluded: “Through further investments in innovation, I believe we can build even higher quality homes better, faster and more efficiently over time.

“We are well placed to manage the ongoing uncertainty and we have good visibility over our land pipeline which, over the medium-term, will support a return to growth in outlets and volumes, alongside improved margins and robust cash generation, paving the way for sustainable shareholder returns.”

In April last year, Persimmon committed £25m to modular builder TopHat in a funding round, but that firm is also now looking to change tack, with a round of redundancies announced last month.

Commenting on Persimmon, Begbies Traynor partner Julie Palmer said:

“If you want to see the pain that the current economic environment has caused the UK’s housebuilding sector, look no further than Persimmon’s results this morning.

“Home sales collapsed by a third in 2023 which, combined with build cost inflation, helped to slash the Group’s profitability in half during a difficult year for the housebuilder.

“It’s clear that would-be buyers are still really struggling to afford new builds and mortgages are still too expensive for many, but with such a significant drop in completions in 2023, there’s just not enough new stock entering the market to make a difference to price.

“At best, one of our largest housebuilders is only forecasting 10,500 completions in 2024, not helped by our glacial planning system. That’s hardly going to move the dial on a structural housing shortage in the UK or help first-time buyers see a noticeable improvement in the affordability of new housing.

“Long-term, we need more houses and as one of our biggest players, Persimmon is set to benefit from this trend.

“Short-term, any corner cutting to improve affordability could see sub-standard properties entering the market and some very unhappy homeowners.

“So, with no immediate fix to a struggling housing market, Persimmon must strike a balance until interest rates come down and we see some further clarity post the election.”