Shares in the UK’s second biggest house builder have hit the bottom of the FTSE 100 after a slump in profit and a warning over pricing in the south and east.
Persimmon reported a slump of over 50% in annual profit of £351.8 million. Revenue fell almost 30% to £2.8 billion for 2023.
The drop came in a year when interest rates hit a 16-year peak at 5.25% after 14 consecutive interest rate rises from the Bank of England made mortgages more expensive. Persimmon completed just over 9,900 homes, a drop of third.
Nonetheless, the average selling price of £255,752, up 3%.
Persimmon also warned that trading in the “southern and eastern counties remains more challenging with weaker pricing” and it was “prepared for 2024 to be another challenging year”.
Its shares fell shares were down 49p at 1325p, a drop of almost 4%, the biggest drop on London’s main stock index.
Dean Finch, CEO, said: “Although the near-term outlook remains uncertain, the significant pent-up demand for homes remains unchanged.
“Customers want quality homes in the places where they want to live and work, and affordability is crucial. During the year we have continued to take further steps to strengthen the business and we are well placed to meet this demand.”
The York-based firm also said that the number of completions in 2023 was ahead of expectations.
But reaction to the results in the City spoke of wider concern about the sluggish conditions in the UK housing market, where the interest rates on offer to borrowers have been creeping higher, as expectations of the extent of rate cuts this year from the BOE ease.
Anthony Codling, at RBC Capital Markets pointed out that Persimmon’s results were “ in-line with expectations”, adding:
“Looking ahead its cup is very finely balanced between half full and half empty, whilst others have sounded cautiously optimistic, Persimmon's tone is just cautious. With little help from last week's budget the Group is relying on self-help to improve returns, but it needs significant volume growth to lift margins and returns.”
Richard Hunter, head of markets at Interactive Investor, said Persimmon had “much damage to repair”.
He continued: “The litany of headwinds for this reporting year are well-known, with the sector facing the combined challenges of lower mortgage availability and affordability, stubborn build cost inflation, higher interest rates and understandably less buying interest.”
