Persimmon says conditions will remain subdued

Persimmon homes
Persimmon profits plunged but the firm ‘will return to growth’

Homebuilder Persimmon said market conditions were expected to remain subdued throughout this year and the near-term outlook remained “uncertain”.

Its assessment came after it reported a 52% plunge in pre-tax profit to £351.8 million for the year ended 31 December. This was below the average analysts’ estimate of £359.5m.

Revenue declined to £2.8bn against £3.8bn in 2022. The company completed 9,922 homes last year, compared with 14,868 in the previous 12 months. The dividend is unchanged.

Dean Finch, chief executive, said: “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.

“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.

Market reaction

John Moore, senior investment manager at RBC Brewin Dolphin, said: “Persimmon is facing into a mixed environment, which is reflected in its annual results. The housebuilder has managed the challenges of the past year well, with sales inevitably slowing from historic levels post-pandemic.

“Higher interest rates remain a headwind and market conditions are expected to stay subdued in the year ahead – there are also significant changes going on in the wider sector, such as the merger of Barratt and Redrow.

“While Persimmon’s bottom line has suffered against this backdrop, the business remains highly cash generative and is well placed longer term – it has the scale others in the sector are aiming for and a good record of being able to adapt to different stages of the economic cycle.

“The structural housing shortage in the UK isn’t going anywhere soon and, so long as that is the case, Persimmon should be one of the main beneficiaries.”

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