Persimmon Profits Up as New Build Rate Falls 

IN ITS HALF year results today, housebuilder Persimmon plc reported a housing gross profit margin of 31% and a 10% drop in home completions.

Persimmon completed 6,652 houses in the first half of this year (H1) compared to last year’s 7,406 completions in the half year ending 30 June 2021.

The company says it is managing cost inflationary pressures effectively and the underlying housing operating margin was 27%, only slightly down on last year’s 27.6%. The Group’s average selling price of £245,597 increased by 4%, while H1 profit before tax is £439.7m compared to 2021’s £480.1m.

The company reports “strong demand” with “robust” forward sales of £2.32bn and expects 14,500 -15,000 completions by the end of this year.

Persimmon says it’s on track to achieve a 10% increase in active outlets by the end of the current year with 60 outlets opened in the H1 and 8,829 plots brought into the business across 37 locations. It says, “While near term uncertainties continue the longer-term fundamentals remain strong”.

Material and Labour Availability

Persimmon’s central procurement team has used its group-wide purchasing power to secure “enhanced deals” with key suppliers, the company says and has shared available resources from centrally-held contingency stock on key at-risk items.

The company has its own BrickWorks, roofing TileWorks and Space4 factories and is expanding these ‘vertical integration’ capabilities to help supply resilience. BrickWorks production has expanded 20% this year, and TileWorks is projected to increase output by around 40% this year alone.

The Group’s Space4 factory provides timber frame homes which can be built over 20% faster than traditionally built houses, Persimmon says, and helps mitigate the availability of some trades. This year, 35% of the homes Persimmon delivered used timber frames and the firm is looking at where it can expand its use of timber frame construction. Its Space4 factory has so far seen a 20% increase in its forward order book on last year. Persimmon has submitted plans for a new Space4 factory to increase future production.

Important Progress

Dean Finch, Persimmon Group Chief Executive, said: “We are making important progress in quality, service, land investment opportunities and efficiencies to build an even stronger business, while continuing to deliver the strong financial returns that Persimmon is renowned for. We have some exciting new sites coming into the business at industry-leading margins, with a land replacement rate for the period of over 130% and expanded production in our own brick, tile and timber frame factories, is further enhancing our supply resilience and cost efficiency.

“We are on track to achieve a 10% increase in our active outlets by the end of the current year as we work to rebuild our outlet position after a land buying pause three years ago and are tackling the on-going challenges in the planning system. We are stepping up proactive engagement with local authorities, enhancing our approach to developing attractive communities and raising the bar on design to help mitigate planning challenges. We continue to expect our volume delivery to be significantly higher in the second half of the year.”