Housebuilder Persimmon has seen its pre-tax profit for the first half of 2023 drop by almost two-thirds.
The developer reported a pre-tax profit of £151million, down 65.7% from £440miillion compared to the same period in 2022. Persimmon also saw revenue drop by 29.5% to £1.19billion as well as a fall in completions of 36%, with just 4,249 homes completed.
Earlier in the year, the housebuilder made the decision to delay starts on 30 of its sites, which has also had a negative impact on its operating margins as it predicted. The developer said it had been focusing on rebuilding its forward sales position over the period, increasing the figure by 49% from the start of the year, which includes an 83% increase in private forward sales.
In the trading update, Persimmon highlighted that higher mortgage rates, the removal of the Help to Buy scheme and significant market uncertainty were behind the poor results. The reduction in completions had a significant impact on the housebuilder’s profit margin, which fell from 31% last year to 21.5%.
The housebuilder is not the first to feel the effects of the uncertain market, with both Redrow and Bellway having recently announced restructuring plans which subsequently led to job losses. Persimmon has not followed suit despite the negative half-year result, but instead has focused on protecting its margins and that it had imposed a recruitment freeze which had led to a reduction in staff numbers by around 300 in 2023 so far.
Dean Finch, group chief executive of Persimmon, said: “Against a backdrop of higher mortgage rates, the removal of Help to Buy and significant market uncertainty, Persimmon has delivered a robust sales rate excluding bulk sales whilst growing the private average selling price in our forward order book and also securing cost savings. We are on track to deliver profit expectations for the year and are building a platform for future growth.”
“Our private sales rate has remained broadly consistent throughout the period resulting in a private forward order book that is now 83% higher than it was at the beginning of the year, despite controlled use of sales incentives and limited recourse to investor deals. Our pricing overall has remained resilient with continued positive momentum in the forward order book. However, the reduced volumes in the first half of the year has negatively affected our operating margins as we predicted earlier in the year. As we look forward, we expect increasing completions to result in improving operating margins.”
