NuGen Properties

Persimmon expects 40% fall in completions

Persimmon expects to build 40% fewer houses in 2023 than in did in 2022, chief executive Dean Finch has revealed.

In 2022 Persimmon recorded 14,868 legal completions; this year “should current rates continue” it is likely to be between 8,000 and 9,000, he said.

Persimmon chairman Roger Devlin said that it was an industry-wide picture: “We are constantly reminded by the political classes of the national need for 300,000 homes to be built every year,” he said. “I expect the outturn for 2023 may not be much more than half this number.”

Persimmon’s financial results for the year to 31st December 2022 show that revenue increased 6% to £3.82bn (2021: £3.61bn) thanks to a 2% increase in completions (14,868, up from 14,551) and a 5% increase in average selling price (£248,616, up from £237,078).

Underlying pre-tax profit was £1,012.3m (2021: £973.0m) but after a £275m legacy buildings provision charge (related to the post Grenfell building safety programme) and a £6.6m goodwill impairment, bottom line profit before tax was down 24% at £730.7m (2021: £966.8m).

Chief executive Dean Finch said: “We are taking action to manage our already lean cost base through disciplined cost control and £40m of efficiencies were identified in the 2023 operating budget, meaning that our combined overhead costs on an underlying basis are holding broadly flat year on year. We have a hiring freeze in place, other than where the role is business critical. We believe 2023 will represent the floor in our volumes and we want to retain our experienced and skilled teams to respond quickly when the market turns back in our favour.”

He said: “The market remains uncertain. Our marketing campaign has helped improve the group’s sales rates in the new year from the lows at the end of 2022, but they still remain lower year on year. We have carefully managed our pricing, recognising the improved value and energy efficiency of our product in these difficult times and sales prices have proved resilient. We responded quickly to stimulate sales, enhance cost controls and preserve cash, promptly slowing new land investment in the fourth quarter of last year. Nonetheless, the sales rates seen over the last five months mean completions will be down markedly this year and as a consequence, so will margin and profits. However, it is too early to provide firm guidance.

“Looking further ahead, the fundamentals underpinning demand for new homes remain strong and we continue to target disciplined growth in the coming years while continuing to enhance our quality and service credentials. Persimmon benefits from industry-leading embedded margins in its existing land portfolio. This is a strong platform for growth from next year as we look to expand our outlet network to provide the capacity to deliver ahead of pre-Covid volumes in the future. A more proactive approach to securing permissions is starting to demonstrate success despite ongoing difficulties in the planning system. We are prioritising securing consents on sites we already own and will complement this through targeted investment in outstanding new land opportunities at the right time.”

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