Material, labour and planning issues impact on Persimmon’s completions

Material, labour and planning issues impact on Persimmon's completions

Dean Finch

Housebuilder Persimmon said today it expects to report a fall in operating margins after surging energy prices, supply chain constraints and rising labour costs resulted in fewer homes being completed in the first half of 2022 compared to the same period last year.

In a trading update ahead of releasing its full results in August, Persimmon said it delivered 6,652 new homes in the first half of the year (2021: 7,406) which was below the first half of 2021, but also slightly lower than previously expected due to the external pressures and “further delays in the planning system”. Total revenues for the period were £1.69 billion (2021: £1.84bn) including housing revenues of £1.63bn (2021: £1.75bn).

The group’s average selling price increased by 4.0% year on year in the first half to c. £245,600 (2021: £236,199) reflecting what it described as “strong demand and a reduction in the proportion of homes sold to our housing association partners”. In the period, 5,553 (83%) of the group’s legal completions were delivered to owner occupiers (2021: 6,104 (82%)) with an average selling price of c. £267,300 (2021: £258,220).

Persimmon said: “Rising energy prices, supply constraints on certain materials and increased labour costs are driving upward pressure on total build costs. Currently, house price inflation is continuing to offset these increases. As a result, we expect to deliver a housing gross margin that is slightly ahead year on year, although, the lower number of completions will result in a slight fall in operating margin reflecting the reduced efficiency of the group’s overhead recovery rates.

“Despite this, we anticipate the group’s profit at the half year to be modestly above our expectations.”

Dean Finch, group chief executive, added: “I am pleased we have further enhanced our build quality in the period while also driving build efficiency to historical highs and increasing housing gross margin. We continued to complement this progress with high quality, disciplined investments in land driving growth in our outlet position. We have delivered this despite the significant ongoing challenges being faced by the industry. As we rebuild our outlet position, delays in the planning system, disruption in material supply chains and challenges in securing labour have impacted completions in the period. We anticipate, however, profit at the half year to be modestly above our expectations reflecting strong demand and positive pricing conditions. Our forward sales position is robust.

“Our disciplined investment is further enhancing our strong land holdings which alongside our rigorous focus on margins is underpinning our continued financial strength. We are expanding our unique vertical integration capabilities to provide further supply resilience and cost efficiency. Our enhanced product range and service quality are strengthening our customer proposition. My ambition firmly remains for Persimmon to become Britain’s best housebuilder for both customers and shareholders alike, by resolutely focusing on the delivery of high quality homes, improved customer service and strong financial returns.”

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