Persimmon warned investors that they should prepare for another “challenging year” as the company became the latest to announce a sharp drop in profits.
The FTSE-100 listed developer, which is one of Britain’s largest, has said that despite some improvements since the beginning of the year the bosses expect market conditions to “remain subdued through 2024”.
British housing has shown signs of stability, but the Bank of England delayed its first interest rate reduction. In addition, macro-economic concerns have dampened hopes of a faster recovery.
Dean Finch is the chief executive officer of Persimmon. He said that, while the near-term outlook remains uncertain the pent-up demand remains unchanged. The company, he added, was well-positioned to handle the uncertainty.
The company stated that “increased competition on the mortgage market, as well as wage growth, have improved affordability. However, it remains constrained for many, especially first-time buyers. Demand for homes is still varied throughout the country.”
Persimmon homes’ average selling price increased by 3% to £255,752 (in 2023), but the company’s revenues fell to £2,77 billion from £3.82billion a year ago due to a decline in sales and a smaller order book. Pre-tax profit fell 52 percent to £351.8million, down from £730.7million in 2022.
The company has proposed a final share dividend of 40p to make a total of 60p per share. This is a dividend that the board plans to “at the very least” maintain this year, and increase over time if conditions allow.
Persimmon was founded by Duncan Davidson in 1972 and has been building houses around York ever since. It sold 9,922 flats and houses last year. This is a third less than the year before but still more than they expected.
The company has said that it has been trading in line with its expectations since the beginning of the year. Weekly net sales per site have averaged 0.59 over the first 10 week period, up from the 0.54 homes sold in the same time frame a year ago. Persimmon reported that the southern and eastern counties were more difficult to trade in due to lower prices. This was offset by better performance in northern regions.
The government expects to build between 10,500 and 11,500 new homes in 2019. Even though it’s an improvement on last year, the number is still below the 15,000 new homes that will be built by 2022.
Anthony Codling of RBC noted that the cautious tone of management seemed to have “taken out the spring in Persimmon’s step”. He continued: “This could lead some to overlook the undeniable progress the group has made in terms of build quality and customer services, but it is difficult for investors see the glass as half-full when the company’s spokesperson sends out the message that the half-empty.
Persimmon announced its results just weeks after its FTSE100 peer Taylor Wimpey revealed that it would be building fewer homes in 2014 following a 48 percent drop in the full-year profit before tax to £473.8 from £907.9 millions.
Persimmon shares ended the day at £13.24, down 50 1/2p or 3.7 percent.