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Persimmon is predicting another tough year ahead for the housing market as its latest results revealed pre-tax profits dropped by 52%.
Results for the year to December 31 2023 showed pre-tax profits fell to £351.8m from £730.7m last time on turnover down to £2.77bn from £3.82bn.
The firm’s 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.”
Results for the year to December 31 2023 showed pre-tax profits fell to £351.8m from £730.7m last time on turnover down to £2.77bn from £3.82bn.
Persimmon said that it would begin to borrow money to increase the volume of new homes it delivers when the market starts to improve.
Finch added: “We are well placed to manage the ongoing uncertainty and we have good visibility over our land pipeline which, over the medium-term, will support a return to growth in outlets and volumes, alongside improved margins and robust cash generation, paving the way for sustainable shareholder returns.”
Commenting on Persimmon’s full year results, Julie Palmer, partner at Begbies Traynor, said: “If you want to see the pain that the current economic environment has caused the UK’s housebuilding sector, look no further than Persimmon’s results this morning.
“Home sales collapsed by a third in 2023 which, combined with build cost inflation, helped to slash the Group’s profitability in half during a difficult year for the housebuilder.
“It’s clear that would-be buyers are still really struggling to afford new builds and mortgages are still too expensive for many, but with such a significant drop in completions in 2023, there’s just not enough new stock entering the market to make a difference to price.
“At best, one of our largest housebuilders is only forecasting 10,500 completions in 2024, not helped by our glacial planning system. That’s hardly going to move the dial on a structural housing shortage in the UK or help first-time buyers see a noticeable improvement in the affordability of new housing.
“Long-term, we need more houses and as one of our biggest players, Persimmon is set to benefit from this trend.
“Short-term, any corner cutting to improve affordability could see sub-standard properties entering the market and some very unhappy homeowners.
“So, with no immediate fix to a struggling housing market, Persimmon must strike a balance until interest rates come down and we see some further clarity post the election.”
Anthony Codling, head of European housing and building materials for investment bank RBC Capital Markets, commented: “Persimmon’s FY2023 results were in-line with expectations, but 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. Persimmon has a strong landbank, but as ever the bottleneck for growth is planning. The shares are flat so far year to date and today’s result statement does little to lift investors spirits in our view.”
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