10th Aug 2023 11:34
(Alliance News) - Persimmon PLC on Thursday reported a sharp drop in profit in the first half of 2023 as the housebuilder felt the bite of higher mortgage rates, the removal of Help to Buy and significant market uncertainty.
The York-based firm said profit in the half dropped 66% to GBP151.0 million from GBP439.7 million the year prior. Revenue totalled GBP1.19 billion, down 30% from GBP1.69 billion, as the numbers of houses built fell 36% to 4,249 from 6,652 the prior year.
"By any yardstick, these numbers do not make pleasant reading as Persimmon continues to swim against a particularly harsh tide," said Richard Hunter, head of markets at interactive investor, adding that the "litany" of headwinds show no signs of abating.
Hunter pointed to the combined challenges of lower mortgage availability and affordability, stubborn build cost inflation, interest rate hikes which have "almost certainly yet to peak" and "inevitably" less buying interest moving forward.
"The true fallout from a potentially weakening UK economy remains to be seen over the remainder of the year and it is also unclear as to how much of the bad news hitherto has been priced in," he added.
"Set against this parlous backdrop, Persimmon has been working hard to assert some influence on the factors within its control. The introduction of incentives and a part exchange scheme have shown some signs of mitigating the wider malaise, while the group continues to acquire new land opportunities on what it describes as an exceptional basis," Hunter continued.
Persimmon's current forward sales position is GBP1.60 billion, 30% lower than GBP2.20 billion the year before. Its forward private sales are GBP875.9 million, up 83% from GBP478.5 million.
Looking ahead to the full-year, Persimmon said it expects completions to be at least 9,000 in 2023. This would be at the top end of its previous expectations, it added.
Operating profit is seen in line with expectations, meanwhile, given "stubborn" build cost inflation.
For Russ Mould, investment director at AJ Bell, it was a "truly bleak" first half for Persimmon, with "lots of uncertainties" moving into the second half of the year as the future direction of interest rates in the UK remains to be seen.
Nonetheless, shares in Persimmon rose 2.6% to 1,152.50 pence on Thursday morning in London. ii's Hunter noted, however, that market consensus of the shares as a hold reflects a "split" of investors "not yet willing to commit to the possibility that the worst may be over."
By Heather Rydings, Alliance News senior economics reporter
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