Persimmon looks for subcontractors to ‘share cost pressures’ as sales continue to fall

Persimmon looks for subcontractors to 'share cost pressures' as sales continue to fall

Housebuilder Persimmon is to put pressure on suppliers and subcontractors to find savings as part of new measures to curb falling sales and profits.

Announcing interim results to June 30, the company said yesterday that sales fell 30% to £1,188.5m (2022 H1: £ 1,688.6m) and profit before tax dropped by 66% to £151.0m (2022 H1: £439.7m).

As well as a continued freeze on recruitment, group chief executive Dean Finch highlighted new cost control measures including ‘value-engineering’ all sites to find savings.

He said: “We are reviewing our subcontractor pricing on a more frequent basis to identify opportunities to secure increased savings. We are actively retendering sites to identify savings.

“Just as we absorbed many price increases from subcontractors in recent years, so we need to share the cost pressures in this new challenging environment.

“While there are of course variations across trades, groundworker, bricklayer and dry liner costs are in general coming down, for example.

“National infrastructure projects like HS2 continue to create pressures in the broader sector, however the overall inflationary pressure is reducing and we are working proactively and in a detailed manner to capture it.”

On identifying areas on its sites for cost savings, Mr Finch added: “This enhanced review and oversight of site costs is being complemented where possible by the expanded use of procurement framework agreements and frequent supplier negotiations to reduce the impact from build cost inflation and capture any pricing opportunities as soon as possible.”

He said: “Regular interrogation of build processes, product specifications and subcontractors will drive opportunities for savings, as will on-going overhead reviews.”

Despite the figures, Persimmon said it had “broadly sustained” improved sales rates through the period and was confident of building 9,000 this year – at the top end of market expectations. 

Mr Finch said: “Against a backdrop of higher mortgage rates, the removal of Help to Buy and significant market uncertainty, Persimmon has delivered a robust sales rate excluding bulk sales whilst growing the private average selling price in our forward order book and also securing cost savings.

“We are on track to deliver profit expectations for the year and are building a platform for future growth.

“Our private sales rate has remained broadly consistent throughout the period resulting in a private forward order book that is now 83% higher than it was at the beginning of the year.”

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