Persimmon Homes is bracing itself for 2024 to be “another challenging year” as it announced pretax profits fell by 50% in 2023.
The UK’s second-biggest housebuilder saw pretax profit drop from £730.7m in 2022 to £351.8m last year amid tough conditions following the sharp rise in mortgage rates in autumn 2022 and a general climate of economic uncertainty. Underlying operating profit fell to £351.8m from £1bn.
Persimmon completed almost 5,000 fewer homes, down from 14,868 in 2022 to 9,922 last year.
Average selling prices increased by 3% year-on-year to £255,752 and the group’s private average selling price increased by 5% to £285,774. However, underlying sales prices were mixed across the country and could not keep pace with build cost inflation of 8-9% on completions in the year.
Group chief executive Dean Finch said: “With interest rates expected to remain at current levels and a general election on the horizon, market conditions are expected to remain subdued throughout 2024. However, we are well placed to manage this and are positioning the business for sustainable future growth over the medium term.”
The group expects to deliver between 10,000 and 10,500 completions for 2024, of which it has full planning on 98%, with an operating margin in line with 2023. Build cost inflation is expected to be circa 3-5% in 2024.
As it looks to increase delivery in anticipation of a housing market upturn, Persimmon said it expects to use a new £700m revolving credit facility this year. This is likely to move the company from an average net cash position to an average net debt position, resulting in interest charges of around £15m-£20m for the 2024 financial year.
Chairman Roger Devlin said Persimmon’s “sharpened approach to planning through local engagement” during 2023 had been successful and paved the way for delivering homes on more sites for 2024.
Around 11,000 plots achieving detailed consent in the period, resulting in a 7% increase in “owned plots with detailed planning”.
Its enhanced planning approach was particularly important, Persimmon said, in light of last month’s Competition & Markets Authority report, which concluded that the complex and unpredictable planning system was “a key driver of the under-delivery of new housing”.
Persimmon said it will also cooperate with the CMA’s investigation into eight housebuilders under the Competition Act 1998 regarding the sharing of information.
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