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Persimmon’s turnover dropped by £1.05bn last year amid torrid economic conditions for the housing market.
The FTSE 100 housebuilder saw turnover drop 23 per cent to £2.77bn in 2023, while its pre-tax profit dropped by 52 per cent to £351.8m, according to annual results published via the London Stock Exchange this morning (12 March).
Persimmon built 9,922 homes last year, a 32 per cent drop from 14,868 completed in 2022, while its underlying new housing gross margin – which ignores the impact of a £275m legacy buildings provision made in 2022 – dropped from 30.9 to 20.5 per cent.
Persimmon said the biggest reason for the fall in margin was the impact of inflation but added that a fall in sale rates and increased use of sales incentives and marketing were also significant factors – as was an increased proportion of its homes being completed for housing associations.
Demand for new housing has been impacted by the cost-of-living crisis and rising mortgage costs triggered by increased interest rates. The average UK house price fell by 2.3 per cent in the year to November 2023, according to the Office for National Statistics.
The company made no further provisions for legacy building-safety works, saying it had made progress on assessing the safety of buildings it had previously completed and carrying out work on those that require remediation.
Persimmon chief executive Dean Finch said the company “successfully navigated the challenging market conditions in 2003”, adding that the housebuilder’s “completions were ahead of expectations [and] margins were industry-leading”.
He added: “Although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged.
“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.”
Despite the reassurances, Persimmon’s share price dropped by 3.9 per cent in early trading this morning, before making a small recovery: as of 10.41am, its share price had dropped 2.8 per cent from Monday’s closing price.
Persimmon is one of eight housebuilders currently being investigated by the Competition and Markets Authority (CMA) for possible breaches of competition law.
The CMA said its probe, launched last month, relates to “concerns that [the housebuilders] may have exchanged competitively sensitive information” including non-public information on sales prices, incentives and rates of sale.
Persimmon said it will cooperate with the CMA on its investigation.
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